Ralf Hennecke, General Manager: International Marketing, BME

Ralf_Hennecke-BME-BLOGRalf Hennecke discusses BME’s long history in Zimbabwe.

In our last report in 2011 South Africa accounted for 75% of BME’s business in Africa and there were plans to expand its operations in Africa. Can you tell us how these plans have progressed since then?

RH: In Southern Africa BME now has a large portion of the market share on surface mining and on the entire continent outside of South Africa, our market share has risen considerably over the last year. This is evident in that Africa is now on par with South Africa in terms of turnover, which is a significant change over the last two years. This can be attributed to phenomenal growth in Africa rather than a contraction in the South African market, as this has in fact been steadily growing. In the last 12 months BME’s volumes grew by 92% in the rest of Africa. Differentiating between surface and underground mining in South Africa, BME has a small market share of the underground market, while we are predominantly strong in surface mining. In Africa, BME is equally strong in both and may even be a stronger supplier for underground mining from a volume perspective. Zimbabwe, Zambia and Ghana have more underground mining than their African counterparts and in both Zimbabwe and Zambia, BME has the largest underground market share. There seems to be a trend in Africa for many surface mines to change to underground when they get too deep.

Zimbabwe already has many developed mines that have stopped producing in the last decade in the face of political turmoil in the country. Have these mines changed to underground since production has restarted in the last few years?

RH: Zimbabwe has always been a predominantly underground market for BME and many plans and feasibility studies have been based on that facet. Many of these existing mines could have been surface mines and some of these are planning to move to surface mining in the future. I predict that mining in Zimbabwe will shift from underground to surface mining over the next few years. In the past the mining industry tended to look predominantly at underground mining, but is now shifting its focus because of economic reasons and the opportunities that surface mining presents.

How will BME with its relationship with Intrachem position itself in this evolving market and how does it affect BME’s security of tenure and the process of indigenization that so many other companies seem to struggle with?

RH: BME has been active in Zimbabwe for over 20 years. It was BME’s first venture outside of South Africa’s borders and BME was the pioneer of supplying bulk explosives into the Zimbabwean market. We brought the explosives specifically to the Freda Rebecca mine that was a surface mine, but has since changed. At that time we partnered with the Zimbabwean entity Intrachem to facilitate doing business in Zimbabwe, where Intrachem carries responsibility for administrative controlling. Over the years Intrachem has served as our market intelligence on the macro-economic front and the Zimbabwean market knows it as the main explosives supplier in the country and are loyal to the name. The market is very competitive and South African companies dominate services because of its locality. Over the years, BME started to build its brand in the Zimbabwean market, however, we have continued with our relationship with Intrachem, which has supported us through the political uncertainty in the country between 2000 and 2008. Apart from BME’s relationship with Intrachem, our parent company, the Omnia group that specializes in fertilizer has also been present in Zimbabwe for over 20 years. These relationships have aided us greatly in navigating the regulatory environment and dealing with the currency issues that Zimbabwe was having. The years 1992 until now have been a great positioning exercise for BME in Zimbabwe. BME has always shown its commitment to the Zimbabwean mining industry by being present in the market during times of stability and times of volatility. BME has made concessions for everyone of its clients in Zimbabwe during times of turmoil and that has been appreciated by the sector.

BME’s business is reliant on very advanced technologies. How do you introduce new technologies into the fragmented Zimbabwean market and how well are they received?

RH: BME is continuously dealing with a changing market and new customers. It is important to understand the market, culture and the customer’s unique challenges because what works in South Africa does not necessarily work in Zimbabwe. BME focuses on tailor-making solutions for our customers in line with the challenges they face. BME is constantly working on new technologies that all our customers have access to, but there are constraints. BME has skilled and experienced blasting engineers in Zimbabwe who support our customers and seek to improve their operations from a blasting perspective. Our testing facilities remain in South Africa and one of the main challenges of supplying new technologies and other products to this fragmented market is the economies of scale that needs to be realised on a logistic front. BME and Intrachem have started to consolidate orders giving us a competitive advantage.

Seeing the value in consolidation in BME’s operations in Zimbabwe, do you foresee a consolidation in Zimbabwe’s mining sector as far as artisanal mining and smaller producers are concerned and will that affect BME?

RH: There is a drive from Zimbabwean authorities to assist artisanal miners into becoming formalized small-scale miners. Small-scale mining will not cease in Zimbabwe as it is seen as an imperative to address socio-economic problems in the country. It is more likely that small to medium sized mines will be taken over by bigger mining groups that will allow them to benefit from economies of scale. Even when a bigger player buys a smaller mine, they do not tend to interfere operationally and the mine remains an independent operation.

With more than two decades of experience in Zimbabwe, what changes will take place in the mining industry over the next five years and what are BME’s plans for Zimbabwe?

RH: The mining sector has had to become particularly resilient in the face of external uncertainties and political volatility. Mines still need to alter their production according to power availability and stability, but the mining sector must be unique in the world when it comes to adaptability. BME will have an abundance of capacity to service the market, especially with the commissioning of our second nitric acid facility. The mining industry will not change dramatically regardless of happens politically and seeing the stability of the sector will soon start to attract investment. The country is extremely mineral rich and the resources are easily accessible.

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