Loaded for Bear: Exxaro’s CEO saga hobbles its diversification drive and may stoke labour tensions

10 Feb 2025

This brouhaha has been a costly distraction for a company that needs to diversify its asset base, and one that also threatens to ignite smouldering labour tensions.

The bitter C-suite battle that saw Nombasa Tsengwa resign last week as CEO of Exxaro is a major setback to a coal-focused mining company that desperately needs to diversify its asset base but has yet to deliver a game-changing deal.

The drama also pits the board against the rank and file. Much of the workforce including members of the National Union of Mineworkers (NUM) backed the embattled Tsengwa. At a time when relations between capital and labour in South Africa’s mining sector have arguably never been better, the last thing a company needs is to have its unionised workforce seeing red.

To wit, Tsengwa resigned with immediate effect on Wednesday, 5 February 2025, days after her bid to challenge her suspension was thrown out of court.

Read more: High court dismisses Exxaro CEO’s urgent application against suspension by board

Read more: Suspended Exxaro CEO Nombasa Tsengwa quits with immediate effect

On Wednesday, 4 December 2024, Exxaro put Tsengwa on “precautionary suspension” pending the outcome of an independent investigation into allegations related to workplace conduct and governance issues.

This alone is not good optics for any company — boards typically do not want their dirty laundry aired. But reporting by the Business Times brought it to light, and so, like it or not, Exxaro found itself in the spotlight of transparency on the issue.

One way to judge the impact of this unseemly scrap is to look at Exxaro’s share price.

In the year-to-date (YTD) in 2025, Exxaro’s share price is up about 10%. By contrast, domestic rival Thungela’s share price is down close to 5% over the same period.

Coal’s price is down more than 13% YTD, so Exxaro’s performance seems fairly good in the face of this trend as well as the tug-of-war at the top.

But viewed through a wider prism, Exxaro’s share price is down about 5% over the past six months while Thungela’s is flat. Exxaros’s share price tanked in December as the management flap took off, and it has now effectively clawed back those losses.

So, it seems that investors initially turned sour over Exxaro as uncertainty took hold, but now see light at the end of the tunnel. Its share price has been extending its gains this year since the high court dismissal of Tsengwa’s challenge to her suspension, albeit at a slower pace than previously.

“At least the uncertainty has been removed, and this always weighs on the valuation,” one mining analyst, who spoke on condition of anonymity, told me. “The longer these things go on, the messier they become.”

But Exxaro faces two big challenges — which I alluded to above — that are rooted in this mess, or exacerbated by it.

Distraction

One is that it has been a distraction from Exxaro’s urgent need to diversify its asset base. Obituaries for the coal industry may be premature, but the bottom line is that the investment tide is decisively turning against the sector because of fossil fuel’s links to human-induced climate change.

One of the criticisms of Tsengwa’s management was her failure to secure a big deal on this front during her nearly three years at the helm.

Exarro has been eyeing opportunities in manganese and copper, and in December finance director Riaan Koppeschaar said in a pre-close message for the financial year that the company at the end of 31 October 2024 had a net cash balance of R16-billion.

“... the intention is to continue to retain cash of between R12-billion and R15-billion to fund our growth strategy”, Koppeschaar said.

So the liquidity is there for a growth/diversification strategy, but it has surely been knocked off course by this ruckus at a time when many other mining companies are also keen to move into that space. And one reckons that no deal is feasible until a new CEO is firmly in place.

'Running the company like a taxi rank'

Strained labour relations are another consequence of Tsengwa’s messy departure. Much of the workforce supported her, and organised labour regards the board’s moves toward her with suspicion.

The National Union of Mineworkers (NUM) — which as at the end of 2023 accounted for almost 85% of Exxaro’s unionised workforce of 5,376 employees — believes the board is on a mission to replace permanent workers with contractors, and that Tsengwa stood in the way.

“We see this as a ploy by those who want to introduce contractors. There are those on the board who want to replace permanent workers with contractors, and she was a stumbling block to that,” Bizzah Motubatse, the regional Highveld chairperson for NUM, told me.

“We are writing a letter to the board because we think they are running Exxaro like a taxi rank. We are going to submit a memorandum on the issue, and if their response is negative we will mobilise our members,” he said.

Motubatse declined to say how NUM members might be mobilised. A wildcat strike or something along those lines seems unlikely.

But having your biggest union unhappy is never a good thing for productivity, and it represents yet another distraction as Exxaro attempts to find a new CEO who can hit the pedal on the company’s diversification drive.

Fraught union relations

A decade ago, one of the biggest risk factors to investment in South Africa’s mining sector was fraught union relations, and the ongoing and often violent conflict between NUM and the Association of Mineworkers and Construction Union (Amcu).

NUM and Amcu have in recent years largely buried the hatchet, while average real wages for mine workers have continued to climb. One upshot is that multi-year deals have been signed in recent years without a tool being downed — a state of affairs that has significantly reduced the risk profile of South Africa’s mining industry for investors.

Against this backdrop, you don’t want to be a South African mining company with worsening labour relations. Any perceived move to replace permanent staff with contractors is a red rag for South African coal miners. They already feel insecure about their jobs, and on average each mine worker has about eight dependants to support.

Exxaro had not responded to my queries on this matter by the time the article went to press.

But this corporate conflict will have consequences, and the worst of them may be yet to come. DM

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Distraction

Fraught union relations