There’s little doubt that Lonmin, a dual-listed company and one of the world's largest primary producers of Platinum Group Metals, has been through a few rocky patches over recent years. Chief financial officer Barrie van der Merwe, who took on the role in mid-April, after his previous post as CFO of Debswana Diamond Company, says this has impacted the CFO role quite significantly:
"Lonmin has quite an involved recent history, so getting to understand the detail behind this remains an emerging picture, though it's getting clearer every day. There's a lot of complexity in this company that I need to understand and learn about." To remedy this, he says there's a lot of work to be done by the leadership, collectively, around resetting expectations externally. "As CFO you are at the core of all these things, as the allocator of capital, allowing many of these initiatives to fly or not."
Barrie has spent most of his working career in the mining sector, though he says this was "less by design than by opportunity", as things simply happened this way. "As a young CA I was working in public practice with PricewaterhouseCoopers as a technical specialist. Just as I completed my articles I was approached by a friend to start a technical accounting unit at Anglo Platinum. That's where the association with mining started," he explains.
Once you've made a name for yourself in the sector, Barrie says it's difficult to be seen as anyone other than a mining finance guy: "Once you've spent 15 years in an industry, that brush paints you." That said, he finds the mining sector an interesting one in which to be employed: "The industry presents unique challenges to those willing to deal with complexity and ambiguity. For a CFO in this industry, a key challenge is extreme market volatility. In South Africa that comes from both the commodity markets and the exchange rate. This places quite an obligation on the CFO to manage the liquidity and capital expenditure of the company very effectively." You have to be proactive with respect to operational performance, he adds, and on any opportunities that the debt and equities markets present. "It also means that the relationship with shareholders and bankers is critically important."
A further distinguishing feature of the mining industry, according to Barrie, is the CFO forming business partnerships with individuals such as mining engineers. "It's a technical environment out there and you need to be able to talk their talk," he explains.
"Also, the level of oversight and regulation in mining is the highest in South Africa, which requires the CFO to be very flexible in the planning cycle to ensure that when we budget and forecast that we allow for some flexibility in our capital expenditure and our revenue streams."
Prior to joining Lonmin, Barrie was CFO at Debswana Diamond Company, and moved to Gaborone with his family - his wife Elmin, three children and his parents in-law - to fulfil the role. He says the diamond industry taught him a lot about the importance of the end consumer. "In most commodities we don't look at the ultimate consumer. In diamonds, we really understood what the markets were like, what sells, who buys. I learnt a lot about the ultimate consumer, and looking through to this in planning," he says. Debswana is a core pillar of that country's economy, and Barrie says this taught him much about the responsibility that mining companies have to countries and communities to ensure they manage their resources and longevity properly. "I learnt that as a company it's very important to be clear on your focus and purpose," he says.
Barrie joined Lonmin in mid-April this year, and says it has thus far been a "tremendous learning experience." He says: "I've learnt more than I thought and I've been challenged handsomely by the role. This is not my first CFO role but it is my first in a listed company. Lonmin is also dual listed (primary listing in London and secondary in Johannesburg) which provides an interesting challenge." Lonmin is one of the world's largest primary producers of Platinum Group Metals (PGMs). These metals are essential for many industrial applications, especially catalytic converters for internal combustion engine emissions, as well as their widespread use in jewellery. Lonmin's operations are situated in the Bushveld Igneous Complex in South Africa, where more than 70% of known global PGM resources are located. Lonmin creates value through mining, refining and marketing PGMs and has a vertically integrated operational structure ? from mine to market.
Barrie says he has not been quick to make changes to the finance team or the way things get done.
"There's a strong finance function here and the systems work well. I have made some changes to the structures to enable me to get a bit closer to things like procurement, and made changes to ensure we resource treasury with a specialist who can focus on capital structure management. I've also tightened some approval frameworks and started looking at the business integrity processes."
He says his role is "quite broad", as it also contains a sales and marketing component - not something ordinarily found in the CFO job. "So I've also started doing some work on the market development strategy," he adds.
His plans for the New Year include getting started on a people development agenda to "ensure competency frameworks are in place to empower the people who work in my teams to understand where they are and where they could go to". Barrie notes that this is something he has done in all the organisations at which he has worked, "to ensure we take the people agenda from anecdotal to a more factual and scientific space".
Lonmin has experienced a fairly tumultuous time in recent years and Barrie says this has impacted the CFO role quite significantly. "Lonmin has quite an involved recent history, so getting to understand the detail behind this remains an emerging picture, though it's getting clearer every day. There's a lot of complexity in this company that I need to understand and learn about. Also, there's the internal part of the organisation and then there are the external interfaces. Internally, the financial situation of the company has led to numerous restructurings, as one can expect. This had a significant impact on morale. Lonmin's people are very engaged, despite what they've been through, but the scars are there. Externally, these events have impacted on how our clients, NGOs and funders view us. So, that impacts our brand and how we are seen." To remedy this, he says there's a lot of work to be done by the leadership, collectively, around resetting expectations externally. "As CFO you are at the core of all these things, as the allocator of capital, allowing many of these initiatives to fly or not."
Barrie believes that finance has an important part to play in navigating troubled waters such as what Lonmin has seen previously.
"Finance can provide many enablers to ensure we are proactive and achieve business success. We must first understand that events happens which involve many players and many factors, most of which are outside of a company's control."
"Sometimes it's near impossible to plan for things like this but we can certainly learn from them and take active steps to prevent such events from happening again. Finance allocates capital to the business and we need to do that in a way that supports the social and sustainability agenda and the interests of all stakeholders. But this can only happen when there is liquidity and access to money."
Risk management also has a role to play, he says, as does procurement and sales, "where we can contribute to things like enterprise development and creating employment opportunities". Finance is oftentimes the catalyst that triggers tough calls, he says, such as job cuts. "Tough love is sometimes needed for the greater good and many times the CFO has to be the catalyst that starts some of these processes."
Barrie opines that CFOs and HR directors would do well to foster greater synergy between their two functions, especially when one considers that much of mining companies' operating costs comprise labour - for Lonmin Barrie says this is 55%. "It's worth partnering with your HR Director to manage this cost, as well as the escalation thereof," he says. You need also to manage the variables, he adds, such as incentives and overtime, which must be done in collaboration with HR.
"With a labour-intensive business like ours, we must ensure that people are healthy, at work when they should be, that they are financially literate, that their transport services work, and that they are engaged in their jobs. And all of this is done together with HR."
When it comes to risk, Barrie says it is important that the board has a clear idea of its risk appetite and what needs to happen should the company go beyond the pre-defined tolerance limits. "There are huge uncertainties in our industry and many of these are outside management control," he says. "Where you can't control things you must be very clear on when you change your reaction to that risk. In mining there exists a massive bottom-up risk as well, in addition to other risks, which relates to safety inspection and audits, the reporting of incidents and closing of these actions. We need to check in regularly to ensure the top-down and bottom-up risk process reconciles."
Describing himself as an "open, honest and simple man", when it comes to his style of leadership Barrie jests that he "gave up the right to be right a long time ago". He says: "I don't' believe it's necessary for me to have all the answers. I listen to people and I treat them with respect, irrespective of rank or who they are. Sometimes I am perceived as a bit of a softie but I know when to make the tough decisions and redirect actions. One thing that I've learnt, and which I learnt from Bongani Nqwababa at Sasol, is that loyalty to the company is the most important thing. It's not about being loyal to your boss but to the company. That's ultimately the test of whether or not you're doing your job well."
Barrie says he gets his motivation and drive from his father: "My father held a leadership position at the town council in Bethal where we lived in Mpumalanga. He worked very hard and I observed that. I watched him work at the dining room table many nights while I was still studying at school. That motivated me to do something useful with my life."
"I don't measure my success by rank or money or the size of the company but I believe it's all about impacting people's lives for the better. I try to find a higher order purpose in what I do. It's not just about the job."
When he's not hard at work crunching numbers, Barrie can be found playing the guitar or concertina in his band, Rooted, polishing up his vintage car collection or seeing to one of his three almost-teenage children - he is the father of triplets, two boys and a girl. Barrie is the vocalist in his band, which he says is comprised of only corporate career folk and which plays a live gig - a paid gig, no less - once a month at the Purple Cow restaurant in Irene. Barrie bought his first vintage car, a 1938 Chevrolet, in 2008, and restored it with his dad's help. "It's in perfect condition," Barrie says proudly. "I've also got an old '77 Merc which I bought from one of my uncles. That's a family car." Barrie says he's always had an interest in vintage cars, a passion he seems to have passed down to his own son, as the two enjoy driving the restored automobiles around town.
As far as juggling his family while building a career is concerned, Barrie says he believes that work-life balance is a choice: "I chose that I wouldn't get myself to the point where my work becomes an issue at home. Leave is my core competency (he laughs). I always take my leave every year."
With such diverse interests outside of work, what is it that he enjoys about being a CFO? "I enjoy seeing the bigger picture in the organisation and being able to trigger proactive action because of this. I enjoy creating order and structure, taking something chaotic and simplifying it, putting order to it. The role allows you to get immersed in what the business needs, and get involved in all sorts of things, working in a space in which the CFO would never have been involved in the past."
