Mark Cutifani, CEO of the Anglo American has reputation as a CEO who gets things done, and something of a turn-around specialist. He joined CNBC Africa Power Lunch to discuss Anglo American’s current position in SA, especially in light of BHP Billiton’s move to spin-off its South African assets. Cutifani sees the SA glass half full, despite obvious challenges. He reminds us that 50% of Anglo’s earnings come from South Africa and 30% of its capital is invested here – Anglo, he tells us, is in SA to stay. Cutifani offers excellent insights into the mining sector in South Africa and the big picture for the country and its resources – a bright spark amidst the recent gloom. – LF
ALEC HOGG: Well, on the line now, we have Mark Cutifani who’s the Chief Executive of Anglo American, and it’s an appropriate time Mark, for you to join us. Given that we’ve had the platinum strike, we’ve had concerns all around the world about the mining sector in South Africa, most recently with BHP Billiton spinning off Spinco, as I think most people are terming it, with the South African assets in it. Any plans to do the same from Anglo’s side?
MARK CUTIFANI: Hi Alec, apart from the announcements we’ve made on platinum and some of the smaller scale assets, across the portfolio and that includes assets outside of South Africa. No, we don’t have any plans to create two different entities. We want to stay where we are. We are a diversified group. We’ve got great potential, and, mostly South Africa is absolutely, critical to our future.
ALEC HOGG: You say, ‘absolutely critical’. What percentage of your profits are generated from this part of the world?
MARK CUTIFANI: Well we proudly say, Alec that about 50 percent of our earnings come from South Africa. We’ve got about 30 percent of our capital deployed here and we would say that South Africa is punching well above its weight, and we’re very proud of that achievement.
ALEC HOGG: Your view about the way things are going though in this country, five months of platinum strikes, has to give you pause for thought.
MARK CUTIFANI: Well it is a concern. I think it is more associated with the specific issues in platinum. I wouldn’t say it’s a more general South African issue, but I do think productivity is a critical issue for us, in South Africa but it is in many other jurisdictions. Yes, it is a concern. It is one, we have to deal with, but none of our jurisdictions are without concern.
GUGULETHU MFUPHI: What about the economic policies and regulations in place like the MPRDA in SA, which could be a threat?
MARK CUTIFANI: Well, I think the engagement that we’ve had, in the last 12 months of the MPRDA has been constructive. There were certain elements that I’ve said I don’t agree with, on the MPRDA, obviously the oil and gas sector provisions are a concern and there’s a couple of other things in the MPRDA that make it a bit more difficult. We did negotiate in a very, open way with the Government and the outcomes that we landed on were agreed. I do welcome the Minister’s thoughtful response, when asked in looking at those areas where there may be some tension, and we’re going to remain a positive contributor but, overall, I think the document, it’s a pretty, solid document and one that we can work with.
ALEC HOGG: There’s a wonderful saying that you should never take or never lose the advantages of a good crisis. Now, there’s been enough crises’ in the mining sector in South Africa to last a lifetime. If you look ahead, maybe three to five years, what do you think is going to change, so that we won’t go back into these kinds of situations?
MARK CUTIFANI: I think, as an industry, the most important thing for us to do is engage in a more real way with Governance, with local communities and with our employees. At the end of the day, there were all sorts of forces involved in the platinum strike but the one thing that we can do better, as Management, is build a better relationship with our employees. I think we have to take full accountability for that relationship and make a difference. The things that I can impact or we can impact, as a group (1) engage with our employees. (2) I think we’re doing that through the MPRDA, negotiate in a real way with the Government to make sure we’ve got a good outcome, and three) do a much better job in our local communities and that is one that I think we’ve all got to do much better on.
GUGULETHU MFUPHI: On the topic of engagement, when was your last site visit to one of your mines here in SA?
MARK CUTIFANI: Sorry, I missed that question.
GUGULETHU MFUPHI: On the topic of engagement, when was your last visit to one of your operations here in South Africa?
MARK CUTIFANI: About four weeks ago, I actually visited the platinum operations. I went to the refinery, the smelter, so I visit a mine about once every six weeks.
ALEC HOGG: I suppose that’s the way that it is going to be in the future Mark. We’ve had the Steve Kearney Playbook, if you like, the way that he transformed Impala, going back over a decade. That seemed to have got, forgotten about and Unions got in between management and the workers. Is that going to be, perhaps a thrust in the future, where the managers get a bit closer to the workers?
MARK CUTIFANI: Well, I think the most important thing is that we have to establish a dialogue with every individual in the business. That means we have to take responsibility for that relationship, so the answer is yes, but at the same time, we have to respect the Unions, as the elected representatives of the workforce, and so we’ve just got to get that balance, in that conversation, I think. A lot better than we have in the more recent past.
ALEC HOGG: Is it more difficult operating in South Africa then in other geographies, where you are present?
MARK CUTIFANI: Some it is more complicated. Some it’s easier. I think it sits in the middle of the pack but I have gone on record as saying that I think South Africa remains one of the better jurisdictions in the world. Its long history of mining, there’s a culture of mining in the country, they do understand what’s required, but at the same time, we are working with, in the last 20 years, with legacy issues that go back more than 100 years. That certainly adds some complications but there are a lot of positives in South Africa that balances that.
ALEC HOGG: What about platinum, much confusion here, some years ago Anglo was edging up its share in Anglo American Platinum. Now you’re hiving off some of the mines, is there still a potential that you are going to take out Anglo Platinum, or the quality mines that are left? What are you thinking, generally?
MARK CUTIFANI: Well, certainly the most important thing we’ve said, to our group’s stakeholders is we want to remain a shareholder of Anglo Platinum. We are obviously, the majority shareholder, so we’ve got no plans to increase our holding, at this stage. That’s point one, and I think, from the Government’s point of view that is an important point to see the company remain a listed entity on the JSE. Secondly, we’re not so much interested in market share. We’re more interested in returns on capital and making sure that we are working to the potential in the business. I think we’ve shifted from a volume strategy to a quality strategy. I think that is a really important shift, and what we’ve been very clear on, is that we would not support additional capital going into assets that have got tighter margins, compared to other assets that we’ve got in the portfolio.
We’ve made a very conscious decision to focus on those assets and then to be fair, to employees in the country, to give someone else the opportunity to do better with those assets that we’ve struggled a little bit with.
ALEC HOGG: Capital allocation.
MARK CUTIFANI: Absolutely.
ALEC HOGG: Mark Cutifani, Chief Executive of Anglo American. Thank you for joining us today and clarifying some of those important issues.
