The dream of worker ownership in the mining sector is in peril after the Salungano Group, formerly called Wescoal, launched an application for the business rescue of Arnot OpCo on Thursday.
Salungano, which owns a 50% stake in Arnot OpCo through its subsidiary, Wescoal Mining, said it had no option but to make the application at the high court.
“Arnot OpCo has been in financial distress for a prolonged period and the option of business rescue is considered the most appropriate under the circumstances, noting that the Salungano Group is of the firm belief that a business rescue plan could facilitate a successful turnaround of the business. Stakeholders are advised that business operations at Arnot OpCo continue as usual, including the supply of coal into the Arnot power station,” Salungano said.
In February 2020, Minister of Mineral Resources Gwede Mantashe hailed a deal that saw mine workers and the community take ownership of Arnot OpCo – the first transaction of its kind in the country.
The Arnot mine, previously owned by Exxaro, was the surrounding community’s main source of income for four decades and its closure in 2015 dealt a big blow to the community.
However, eight former Exxaro employees decided to revive the mine. They formed a company, Innovators Resources (IR), using their retrenchment packages and pension payouts as seed capital for the mine.
To assist its former employees, Exxaro donated all its mining and office equipment at Arnot to IR. The employees then partnered with Salungano.
This saw Arnot OpCo revived, with Salungano holding a 50% share and IR a 25% share in it. The 1 029 retrenched Exxaro employees received a 25% share in Arnot.
Former Exxaro project engineer Bontle Aphane became Arnot’s CEO.
However, things went pearshaped quickly. Sunday World reported in February that a preliminary report by Sizwe Ntsalubagobodo (SNG) Grant Thornton revealed that no sooner had Arnot Opco risen from the ashes did the feeding frenzy take root at the company, with procurement processes flouted.
The report showed a company in disarray, with senior managers implicated in the mismanagement of company funds.
SNG Grant Thornton’s findings were scathing on the company’s executives, some of whom were found to have unduly benefited from the shift allowances system.
The probe also found that executives entered into contracts without the requisite board approvals and some service providers commenced work/services without valid contracts.
Arnot Opco makes most of its money from supplying coal to Eskom’s Arnot power station in Mpumalanga. According to evidence presented to SNG Grant Thornton, the firm received R797-million from Eskom between March 2020 to November 2021.
Arnot Opco chairperson Mxolisi Hoboyi said IR was not made aware of, or consulted on the business rescue application.
“It is unfortunate that Wescoal Mining has taken this step at a time when IR has been calling for the parties to meet to resolve any issues. We are consulting our legal team regarding the application and we will be in a position to comment as soon as we have obtained legal advice,” he said.
“What is important is that Wescoal was invited to the deal of first kind in history of mining, but we refused to be bullied by Wescoal not now and or ever. We will defend our assets that were donated to us by Exxaro as former employees,” Hoboyi said.
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