Bafotech Founder and Marketing Director, Chris Boone has built his business successfully over the last 34 years but as the mining industry in South Africa faces decline, he has been forced to look further afield for growth opportunities.
The mining industry in South Africa has been hugely important to the country over the years. It has shaped the country politically, culturally, and economically, and helped to position us as one of the most powerful economies on the continent.
It all dates back to 1867, when the first diamond was discovered on the banks of the Orange River. By 1886, gold and diamond rushes were quickly turning mining in South Africa into the nation’s staple economy.
In 1970, gold mining in South Africa peaked, contributing 68% of global production for that year. By 2001, mining in South Africa had produced a total of 51% of global platinum group metals ever mined.
Today, South Africa is the world’s largest producer of chrome, manganese, platinum, vanadium, and vermiculite. South Africa is the world’s second largest producer of ilmenite, palladium, rutile, and zirconium and the mining industry remains one of the country’s biggest contributors to GDP and employment.
But in this time of global economic crisis, financial unrest, Chinese decline, energy supply problems and commodity price uncertainty, South Africa’s mining industry has felt the pinch in a big way. Some of the major mining houses have been forced to close operations, retrenchments have been made, costs are continuing to rise as valuable reserves become more difficult to reach and businesses involved in the industry are increasingly looking at diversification to stay afloat.
In August, Economic Development Minister Ebrahim Patel said that the mining industry is “in trouble” as it struggles to recover from 23,000 job losses since April and falling commodity prices from key markets like China. Mineral Resources Minister, Ngoako Ramatlhodi was forced to hold urgent talks with leaders of the industry to discuss the problems.
However, even though the industry is facing the biggest challenges in its history, there are some that have managed to find positives. Bafotech, the Welkom based ‘one stop scraper winch shop’, is looking beyond South Africa’s borders to help continue the growth it has seen over the last 34 years.
LATIN AMERICA
“Where things have picked up is in South America,” says Bafotech Marketing Director Chris Boone. “It’s growing slowly but we are starting to see things there. We have agents in Peru and although the conventional mining is on a much smaller scale, we are seeing positive activity there. In South Africa, we use 37kW or 50, 75 or 100 horse power winches but over there they’re using 10, 15 or 20 horse power winches.
“Recently we’ve supplied units to Bolivia and Columbia. I’ve also quoted on a few different units in Brazil and it’s looking like we will supply some units directly into Peru. I’m planning to head out to Chile next year personally, depending on the market conditions, as there are a lot of Anglo American mines there and they tend to use bigger winches.
“We do have a good reputation but there’s also a cost consideration. We flew our units to Columbia and it was cheaper than they could get them from North America. Obviously, they know our quality is there but price also plays a big part. The rate of exchange is playing a big role right now,” says Boone.
Despite a softening in the global mining sector, Latin America continues to grow as a destination for mining investment, exploration and development on the back of its highly prospective geology, reduced cost profile and attractive mining environment. The region of Latin America covers one-sixth of the globe and produces more than its share of the world’s three most important metals – iron ore, copper and gold. With its huge iron-ore mines, Brazil dominates the region’s mining, whilst Chile, because of its important copper mines, was the second most significant producer of mined metals in Latin America during 2013. BNamericas Mining Readers Survey 2013 showed that 44.4% of mining company respondents saw Chile as the South American country with the best mining investment climate.
WINCHES
Bafotech is a manufacturer and distributor of high-quality winches and winch components that remove materials from the mines. Double-drum scraper winches and mono winches are the company’s core products and it also offers a comprehensive repair and refurbishment service. Double-drum winches are used after blasting to pull loose rock into a box hole and then into chutes to the main shaft where it is loaded into skips and sent away to a processing plant.
The company has interesting origins, being started by Boone and his brother with nothing but a borrowed desk, two chairs and a computer that had been won in a raffle. At that time, the duo were simply buying and selling machines in a wholesale-style operation until they decided to manufacture the units themselves. Today, the manufacturing workshop is a 10,000m2state-of-the-art facility and is complemented by a 2500m2repair workshop.
Away from the well-publicised difficulties in the mining industry, there is another threat that is keeping Bafotech thinking and that is from the increasing mechanisation of mines. Dr Declan Vogt of the Wits School of Mining Engineering told Mineweb last month that mechanisation can improve productivity.
“Workers are less enthusiastic about working on mines, and they are demanding better pay,” he said. “Against this background newer platinum mines in the Eastern Bushveld were planned as mechanised mines, and several are running very successfully. A majority of the lowest-cost underground platinum mines are mechanised, as is the lowest-cost underground gold mine,” he added.
Boone says that mechanisation would not benefit Bafotech. “Our winches are for conventional mining which tends to be a labour intensive operation,” he says. “Many companies are looking at mechanised mining and LHD mining, and where a traditional system would use 300-500 of our units, a mechanised system would only use 200 so it’s detrimental to us.”
But this of course means that the company is looking at new ideas and new products, some which are still in development and are yet to be publicly discussed.
“We are looking outside the box and we’re busy developing a few other things which could work with a mechanised mining system. All I can say right now is that we’re working on it and we’re busy with a couple of different things. It will be a big change for us so we have to see how we can work it and then we’ll go for it.
“We could look at the building industry where we could work with structural steel but that’s a totally different type of business for us,” he says.
OVERCOMING THE SLUMP
Although Bafotech has started to mitigate the declining South African industry problems by branching out to other parts of the world, the difficulties will remain in its home market. Even the International Monetary Fund has weighed in on South Africa’s economy, claiming that gross domestic product will expand just 1.3% next year, which would be the slowest pace since a recession in 2009.
Boone says that Bafotech has certainly seen the effects of the slow economy but he is adamant that he will not be forced into lowering prices to an unprofitable level.
“Our main business comes from the gold, platinum and chrome industries,” he says.
“A lot of projects and a lot of development has been stopped because of low commodity pricing and that immediately effects most of the mining industry. We all need new projects and new developments for our products.
“It’s very tough. We’ve stopped a lot of our Capex and we’ve also reduced staff where we’ve had to. We’re all just waiting and hoping that commodity prices turn around. We’re in a reasonable position; it’s not as bad as last year when we had the large strikes but we do have to be careful. We are getting a reasonable amount of work in although it’s all repairs and nothing new but we are certainly still on the right side of things.
“The big mine in Botswana, BCL, have also been re-vamping their operations so work there has come to a halt in the last six months but we are told that they will be ready to go again very soon. We do have bits and pieces in Zambia but all of our opposition is going there and then it becomes a price war which I would like to stay out of. I have to make certain margins so I would rather step away than get into a price war,” he adds.
To ensure that no extra, unnecessary pressure is shouldered by the company, and the industry, Boone says that the focus on safety is one of his primary concerns.
“We are doing a lot of development of our own people; sending them to training courses and helping them to develop their skills.
“Safety is an ongoing issue for us. We constantly look at any area where we can improve. We’ve changed the casing on our winches so that people can’t get their hands in and get injured. If something like this happens, the DMR (Department of Mineral Resources) will close the whole mine down so we work together with the mines to ensure safety standards are met. Safety is extremely extremely important,” he says.
Although there is no doubt that this is a difficult time for the industry and all of its stakeholders, Bafotech is a business that has been operating successfully for over three decades. It has family roots, a strong focus on offering quality, and an ownership structure that is well versed in riding the waves of the economy. As Lesedi Rakgokong of Matantabelo Investment Holdings (30% owner of Bafotech) says: “Tough times are not for giving up, but beefing up.”