Don't stand on the sidelines: Kumba CFO Bothwell Mazarura
Kumba Iron Ore CFO Bothwell Mazarura talks mining, Marikana and technology.
Twice during the interview with Bothwell Mazarura, the Kumba Iron Ore CFO remarks that he does not want to stand on the sidelines. The first time, he uses the expression to explain why he left Deloitte after 18 years to join the corporate world and get his hands dirty as an executive, rather than a consultant. The second time, he is talking about the role of the CFO in a modern organisation. “You need to get your finance team to think about how it should engage with the business,” he says. “We’re not just keeping score, but we’re driving performance.”
In a candid conversation with CFO Magazine, the former Lonmin manager talks about “purpose”, the pain of Marikana, the duty of the mining industry towards all its stakeholders, the role of finance as performance driver, the high quality of Kumba’s iron ore, and the opportunities and challenges that technology brings.
“Why did I end up in mining? I had to think about that recently, as even during my time at Deloitte I mostly dealt with mining clients,” says Bothwell. “I think it has everything to do with personal purpose,” he adds, recounting the way his father cycled the dusty back roads of Zimbabwe to help farmers derive more value from their pastures. “Mining, and even more so, mining in Africa by its proximity to communities, the number of people it employs and its potential to generate significant value is well-positioned to create uplifting value for its communities and its people while playing a key role in the economies of African countries.”
Understand your purpose
“I trained as an accountant, but I have always been busy with the question ‘how can we uplift people and create value from the land?’,” says Bothwell. “Once you understand your purpose, whether it is personally or as a company, profitability becomes the result and not the key driver of why we do what we do. That notion can be difficult for us as accountants.”
Difficult as it may be, Bothwell does not shy away from sharing his approach. When he joined Kumba last year, he organised a strategy session with the entire team and to their surprise, they mostly ended up talking about purpose and other soft issues, which isn’t always easy for accountants.
“We tend to gravitate towards technical issues and find it much harder to talk about ethics, vision and purpose. I do wonder whether these skills are taught the right way when studying to become a CA(SA).”
Setting a clear, uplifting vision for the finance team and the entire company helps focus the minds and can bring great benefits, Bothwell believes. “In mining we are always looking to become more efficient and more productive. As leaders we often grapple with the question: how do you get a person to go the extra mile? How do you get that discretionary effort from your team? I think it all centres around purpose and vision – if you are able to paint a compelling picture, if you create a clear idea of why everyone should come to work every day, you start to unlock the discretionary effort.”
With that comes a collaborative leadership style, Bothwell explains. “When I start a new job, like last year at Kumba, I have a pretty good idea of what I want to achieve and how to do it. It is then easy to say to your team: do A, B and C. But if you are not in a situation where you have to hit the ground running, it is important to take the time to co-create a vision and involve the team in discussing and debating plans to turn that vision into reality. During the process, you learn a lot about your team and the result is a strategy that everyone buys into.”
After 18 years at Deloitte, eight as a partner, Bothwell joined Lonmin in 2010, where he headed up accounting and reporting and then treasury, before becoming head of group finance in 2014 – and acting CFO in between. In 2012, 34 striking mineworkers were killed by police bullets at Marikana.
“Marikana is one of the most difficult things I have ever experienced. My office used to be there, near that koppie. Something like this changes your life forever. As an industry we are continuously striving to accomplish zero fatalities. People can’t die just because they go to work. On that day... there were 34 of our own people who died in one event… I don’t think I will ever fully recover from that.”
The event shook Bothwell to the core, but at no stage did it make him want to leave the volatile environment. “In fact, it gave me a lot of resolve,” he reflects. “I did not want to run away. There are things we need to fix and work on as an industry. We still have a lot of potential to contribute to the country and its people. For me, Marikana emphasised our duty as an industry to be profitable while looking after our employees and our communities. We also have a duty to make sure all stakeholders understand that balance.”
Although most mining executives now acknowledge that balancing stakeholders and communication are crucial, the reality is tough. “Mining is a long-term game – it can take upwards of 10 years to bring a big mining project online. We need to ensure that our regulatory stakeholders understand this and help us create an environment that attracts long-term investment. As executive management we have to build trust that we are allocating this capital sensibly. I have to convince shareholders that my investment plan will give them better value than when I just give them the cash at the end of the year. Once I have done this, I have to deliver. It is this delivery that creates value that can be shared by all stakeholders.”
After spending six years at Lonmin, Bothwell joined Wescoal Holdings Limited, a junior coal miner with significant growth ambitions, as its CFO. During his year-long tenure as CFO, Wescoal acquired another listed coal miner, Keaton Energy Holdings, more than doubling the size of the business.
“But then Kumba came knocking.”
Working for the Anglo-owned firm was an offer he could not refuse, says Bothwell. “The iron ore industry changed drastically in 2014/2015, with iron ore prices declining sharply, which placed margins under significant pressure. Kumba reacted by adopting a strategy of value over volume. Its flagship mine, Sishen, was reconfigured to a lower cost pit shell and significant restructuring was undertaken to right-size the organisation and ensure long-term sustainability at lower prices. This has started to bear fruit, in combination with a recovery in commodity prices. Once again, we have become a significant cash generator as evidenced by the resumption of dividends in 2017.”
“However, I’ve been in this industry long enough to know that we cannot rest on our laurels. We understand our structural disadvantages compared to some of our peers in the form of longer distances to port and end markets and higher stripping ratios. Sustaining operational improvements becomes crucial. Conversely, Kumba is endowed with a high-quality product – we achieve premiums in the market for our higher lump-to-fine ratio and a higher iron ore content giving us a competitive advantage. Going forward we will look to maintain our competitive edge while ensuring the business continues to provide returns through the commodity cycles.”
“As we become more efficient and productive, we deplete resources at a faster rate, bringing into focus matters of resource extension and growth. One of the areas we are focusing on to address this issue is investing in processing technology for our lower grade material. That means we can go back to our dumps as we can now viably process material that previously would not have made the cut off grade.”
Finance of the future
“All this makes Kumba a very exciting place to be right now and it’s not often in this industry that you get to say, ‘the future is bright!’.” It is up to Bothwell to craft a finance team that is equipped to deal with that future; a finance team that understands key business imperatives, its role in delivering those imperatives and its function of driving performance in the business.
One of the biggest opportunities for the finance profession are the rapidly evolving technologies. “They are allowing us to build data and free up people to analyse and think about the data,” says Bothwell. “Technology is giving us better information faster and is making information readily available to the entire business. Gone are the days of pockets in the business monopolising certain information. Equipped with better, more timeous information and with more time to interpret the data, the finance function is better able to meaningfully participate in driving business performance and influence key business decisions. Furthermore, I have finance people in every location of the business, so we can really play a role bringing the business together. The question becomes: are our finance people actually equipped to do their new jobs now that they don’t have to spend time preparing spreadsheets anymore?”
Not only is finance changing as a result of technology, but so is the entire business. “Technology and innovation are absolutely critical, but should never be for the sake of themselves,” says Bothwell. “They should help us achieve at least one of three things: reduce cost, increase productivity or make our operations safer. For example, auto-braking in our haulage vehicles or automated drilling, where the attendant now sits in a control room.”
Of course, Bothwell admits, there will be less jobs in the mining industry in the future. However, the CFO hopes that the sector can help individuals thrive like never before, replacing low quality work with higher skilled jobs. “From the employee’s perspective, their manual unskilled job is evolving into one for which they are upskilled. Because of this, they are less tired after their work, creating opportunity to spend time outside of work furthering one’s education or spending better quality time with families.”