As July Ndiovu prepares to step down as ceo of Thungela Resources, he reflects on transforming a near-abandoned business into a multibillion-rand powerhouse and leading an unlikely energy crusade, writes Lisa Steyn.
It wasn’t very long ago that sentiment around coal had brutally negative.
So much so that no one dared say a good word about it.
But July Ndlovu did. At a gathering of the World Coal Association to which he was appointed chairman in 2020, he recalls: “ We really were at a time where the narrative was so against coal that you just could not stand publicly and say, believe in the future of coal. It took courage …. So I said to them what you’re going to have to do is almost similar to a lone evangelist standing on the hill preaching his word, whether people listen or not. Eventually, they’ll hear it. They may not believe him, but they’ll hear it.”
It was Maxim Basov, then CEO of the Siberian Coal Energy Company, who subsequently dubbed Ndlovu the high priest of coal, and the moniker has stuck ever since.
It was around this time that Ndlovu had the unenviable task of leading Anglo Coal as it was spun out of Anglo American to become Thungela Resources.
There were plenty of naysayers then too, with many predicting the Thungela share would steadily tank.
But the opposite happened. From a listing price of R25 per share in June 2021, the stock soared to over R380 at one point. It currently trades at R90 a share and has returned some R22 billion to shareholders. Strong cash flows enabled the company not only to progress local long-life coal projects but also to diversify into Australia, where it acquired the high-quality Ensham coal mine.
One can't help but think Thungela got very lucky as Russia's invasion of Ukraine in early 2022 disrupted global energy supply chains and stoked coal prices to record highs.
“I think it's a combination. You make your luck too,” says Ndlovu, speaking with News24 at his swanky Rosebank office.
The commodity price cycle and geopolitical events of the time were the bit of luck involved.
“But, we would not have de-merged this as a coal business if we didn't believe in the fundamentals and understood that the demand fundamentals will support the future of coal. So in doing that, I think we made our own luck,” he says.
Thungela took what was a short-life coal business to create a resilient long-life one through various investments.
“If we had not started looking for opportunities, actually what would have happened is we would have been making all this money, and we would not have had anything to invest it in,” he says. “So we prepared ourselves, almost with very high conviction that we would be able to invest in creating a long-life business. And when the stars lined up, we were ready.”
Dressed for success
One thing to be noted about the high priest of coal is his snappy dress sense — often offering the only pop of colour in a sea of navy-grey suits at industry events.
Ndlovu is not sure where it came from, but his father always dressed well. "He was a strange old man, even after he retired and he was in the rural areas, he would wake up and put on a suit," Ndlovu says, noting that wearing a suit is, in any case, something which is non-negotiable in Zimbabwean business circles. But maybe very early on in my varsity days, I figured out that it just dressed differently. I could get my own signature. And that's when it started, almost as a hobby."
After a brief stint at medical school, Ndlovu went on to study Metallurgical Engineering at the University of Zimbabwe. His career at Anglo American kicked off in 2001 as a graduate employee in the platinum business before taking on senior roles in metallurgical operations and technical services at Anglo subsidiaries in Zimbabwe.
Ndlovu came in to head Anglo Coal in 2016 at a time when the coal assets were determined to be non-core to the group. Part of his role was to dispose of the Eskom-tied coal mines during the height of state capture, something which he describes as “probably the most interesting experience that I've had in my career.
“As you can imagine, there were players that, you know, wanted to buy our assets, which we couldn't sell to them. But it was also quite difficult to... I mean, you can ask Mike [Teke, of Seriti Resources] and his team how difficult it was to get the consent to transfer the Coal Sales Agreements from us to them.”
Whether Eskom’s resistance was for commercial or other reasons, the transaction took a lot longer than anyone anticipated.
While other Eskom coal suppliers tell tales of the overt pressure they came under to make certain deals happen, Ndlovu said it helped to have been part of Anglo American a sizeable and ethical organisation.
“They'll frustrate you rather than come to you directly and say, we want you to sell to this one... I think what happened is they just delayed approvals, hoping that at some point we'll get the message. But eventually we did what was right.”
Fast forward to 2019, it became very clear that Anglo would not put capital into the remaining coal business the export mines.
“Strategically, I was faced with one of two choices. Anglo would either have to spend money, or I would have to start closing down mines. There was nothing in between,” Ndlovu said.
He recommended to Anglo that, unless it was prepared to invest in the coal assets, the time was right to exit.
Hard yards
Ndlovu also navigated Thungela through a severe rail crisis, which especially impacted the coal export line, the onset of which was rather sudden.
What created the crisis was the Transnet Board's cancellation of the contract with the China Railway Rolling Stock Corporation (CRRC). It was a well-intentioned bid to take a strong approach against state capture deals, but there were no contingencies in place.
“So CRRC stopped supplying both new equipment and spares. And that's when the problem started”, Ndlovu says.
Six years on, and alternatives have now been put in place to help solve the problem. Key has been the appointment of an alternative original equipment manufacturer to maintain and supply parts for these Chinese locomotives.
In some respects, the current Transnet CEO, Michelle Phillips, finished off what her predecessor, Portia Derby, had started, Ndlovu says.
"The industry had years back identified that they could supply close to 80% of the components and spares for these locomotives from other parties," he says. "Where I think Portia failed herself was that she didn't move as speedily... and actually, the reality is the requirements of the Public Finance Management Act (PFMA) at the time hamstrung her enormously."
When the new leadership walked in, the National Treasury offered Transnet exemption from certain PFMA requirements.
“So it's almost a natural evolution of solving a crisis that happened. Quite honestly, if you ask me, I think Portia would have done the same thing if she had stayed... sometimes the one who gets hit with the problem right, it almost always falls on the sword.”
Ndlovu has played a key role in the collaborative effort between business and government to solve the rail crisis.
As chairman of the coal leadership forum, representing all exporters on the coal corridor, Ndlovu acted on behalf of the coal exporting industry.
He believes things are stable now. “We're not in the 2023 complete disaster, where we couldn't tell whether we're coming or going. But at least now we have the foundation in place. I'm much more optimistic about the direction of travel now.”
Asked if the coal line will ever get back to record rail volumes of over 77 million tonnes, Ndlovu is not sure South Africa needs it. “I think the coal industry going forward will have to reassess exactly what is required. My gut says it's somewhere between 65 and 70 (million tonnes)."
Life in the slow lane
While Ndlovu is ready to step into retirement, it's a curious fact that he is only turning 60 next year.
In 1978, during the peak of the Rhodesian civil war, the Rhodesian army burned down Ndlovu's school. Everything was lost, including identity documents, but to write Grade Seven exams, he and other students required birth certificates. The headmaster drew up a list and made the daunting trip around land-mined routes into town to obtain the certificates. The end result was Ndlovu being one year older on paper, and a name change too. “So instead of being Julius, it became
July. Instead of being born in 1966, it became 1965.”
Although the retirement comes a year earlier than it should, Ndlovu is looking forward to the slow lane and plans to spending time with loved ones and reacquaint himself with certain hobbies.
“I might sit on one or two boards, but I don't want to be executive-busy. So I'll choose boards where I think I can make a difference.” Looking back, his only regret is that he didn't set his sights higher. “We created so much value in this business. We could have done so much more by growing this company much faster than I did.”
The year ahead is looking uncertain for coal, with prices languishing despite tense international relations.
Ndlovu says there are a number of factors that are playing out in the energy complex as a whole.
For one, a notable consequence of the focus on energy security post the war in Ukraine, is that countries want to be independent in terms of energy. As a result key markets like India and. China, are producing significantly more coal in country, and that has dampened demand to an extent.
“So until all these factors play out, the thing that you can be assured of is that volatility and uncertainty are going to be a feature for these markets, probably for the remainder of this year,” Ndlovu says.
As for Thungela's future aspirations, he doesn't want to prescribe any direction the company ought to take after his exit.
While Ndlovu says he has high confidence in the rigour that went into the choices that the board made on company strategy, he still expects his successor De Beers' Moses Madondo to examine every assumption made and to formulate his own views.
Ndlovu will remain a shareholder and will watch with keen interest what management and the board do. “And I'll be at the AGM, asking them questions too,” he laughs.