More than meeting demand
Long-term relationships, shrewd investments and an excellent reputation have enabled mining company Benicon to thrive even as others falter. Andrew Pelis talks to CEO Gideon van Heerden to find out more.
It is the nature of todayÔÇÖs business world that small, successful companies tend to get swallowed up by the bigger corporations. Outcomes can be mixed; but for one South African mining entity, being bought out gave it just the impetus it needed for astronomical growth.
Benicon, headquartered in Witbank in South AfricaÔÇÖs mining province of Mpumalanga, was already working on long-term contracts when the markets began to falter; however, the benefits of having been recently purchased by the Sentula Mining conglomerate were paying dividends. Added to which, the demand for coal has been unrelenting and to some extent, has shielded mining companies from the full effects of the global economic crisis. Benicon was therefore able to emerge from the recession in a particularly strong position.
Benicon operates as a full mining company, offering a variety of services across the whole gamut of coal mining including contract mining, mine planning, drilling and blasting, overburden removals, coal extraction and mine rehabilitation.
ÔÇ£The company was founded back in 1979 and used to be privately owned,ÔÇØ explains CEO Gideon van Heerden, who has worked his way up the company ranks having joined with a mechanical engineering background back in 1992. ÔÇ£During the last decade we began to see expansion and in 2006, Sentula Mining purchased the business, at which point I was appointed as CEO.
ÔÇ£As part of a listed company, our whole world has changed since then,ÔÇØ he continues. ÔÇ£A lot of good things have happened, such as access to financing, while the prestige of being part of a bigger group has led to us winning bigger contracts.ÔÇØ
While acknowledging that the takeover also adds pressures such as adhering to corporate governance, van Heerden says that the subsequent investment Benicon has been able to make has contributed to its remarkable 300 per cent growth rate over the last three years. ÔÇ£Back in 2006, we had 400 employees. Today, that number stands at 1,200. Undoubtedly this is partly because we have been a contractor for many years, during which time we have forged an excellent long-term relationship with Anglo American.
ÔÇ£As their business has grown, so has ours; and while we may have once struggled to meet demand (in areas such as purchasing new equipment and bringing in more staff), with investment from Sentula we have been able to match our understanding of the business with capital expenditure.ÔÇØ
Among the enormous array of mining equipment that Benicon has purchased have been a number of draglinesÔÇösome of the largest pieces of equipment used in mining and a rare commodity in Southern AfricaÔÇöwhich have undoubtedly played a significant part in the companyÔÇÖs recent successes.
As the company has grown, so too has its need for training, and van Heerden says that this has become one of the key drivers for the whole business. ÔÇ£It is always a challenge to get good people, especially highly skilled artisans and managersÔÇöand in this mining area, there is a lot of competition to hire the best staff. Our strategy has been to start training people at the lowest level (we currently have 45 people going through our courses) and we have a three-year lead time before we feel people have sufficient experience to add value to the business. Much of our training is outsourcedÔÇöwe send employees to colleges, for example. The results are beginning to become apparent now as many of our managers came through our training programmes in the early 2000s,ÔÇØ he explains.
The need for training became ever-more apparent as Benicon embarked on its Black Economic Empowerment (BEE) programme. Van Heerden explains that the first step was to identify individuals that the company felt had the greatest potential. ÔÇ£It has been a very successful but slow process,ÔÇØ he comments, ÔÇ£and we have also seen one or two employees leave the company after getting qualified. But our efforts fit in well with our goal to reach Level Four in the BEE programme (we are currently at Level Six).ÔÇØ
At the same time that BEE became a focus, so too did the need for Benicon to recruit a team of engineers to help maintain the companyÔÇÖs ever-growing fleet of Caterpillar earthmoving equipment and trucks. ÔÇ£WeÔÇÖve actively purchased a lot of equipment and now command a fleet of 380 earthmoving machines. Overall, we have invested around half a billion rand between 2006 and 2009,ÔÇØ van Heerden says. ÔÇ£This of course has meant that we need engineers to maintain all the equipment.ÔÇØ
Benicon has also created a fully fledged in-house workshop that services vehicles and can strip down and rebuild equipment. There is the possibility that the workshop could provide services for other companies in the Sentula group going forward.
While the economic woes of the world have had some impact on the company, van Heerden says that this provided Benicon with the opportunity to review all aspects of the business. ÔÇ£Last year was a difficult year but we rebalanced our strategy by fine-tuning all of our departments. We were working with the right commodityÔÇöthere is always a big demand for coal, so while there was no real growth, there was also no real downscale.ÔÇØ
Having already purchased so much equipment, van Heerden believes that BeniconÔÇÖs position can now only strengthen, as other companies find it tougher to secure financing for capital expenditure in the new business environment. He foresees an exciting future for the company: ÔÇ£Commercially, we have had to contend with new competition entering our markets as work scaled down. It has been important for us to keep clients satisfied by continuing to perform well; and we have won a couple of new contracts in the last month.ÔÇØ Having undertaken occasional sorties into Mozambique and Zambia, Benicon now has high hopes of further expansion across Africa over the next two years.
All this, of course, is coupled with the strength of ongoing long-term contracts and an excellent reputation in the region. ÔÇ£We are quite bullish; we are in the right business; and we have good foundations and a strong future ahead of us,ÔÇØ van Heerden summarises.
