Chairperson's report


On an annual basis the Board reviews the Company’s application of the King IV principles. We are pleased to report that the Company is compliant with King IV in most material respects.





Poor global market conditions, which affected demand and resulted in lower ferrochrome prices, together with increasing input costs of production, made 2019 a difficult year for the Company and the industry we operate in. Further, South African producers were faced with increased power challenges and rising power costs as well as challenging social issues. This unfortunately led to results well below both our expectation and our previous year’s achievement. On a positive note, there were improvements in the safety performance at the Venture, despite the unfortunate fatality at Magareng Mine, which we reported on in August 2019.

South Africa has had another eventful year. The lack of good governance in government, state owned enterprises and the private sector has been laid bare by the various commissions of enquiries. Failures at Eskom and rising power costs have particularly negatively affected our industry. To take the country forward, South Africa urgently requires sustained ethical leadership in government and business, which would lead to a conducive environment for new investment. It will not be an easy task to attract investments in order to grow the economy so the country can address the key challenges of unemployment and income disparity due to a difficult global environment. Having policy certainty and a sense of urgency in ending corruption and holding those accountable for the present state of affairs would be a good start.

On the global front, our Chief Executive Officer mentions in her report, the issues that impacted the performance of the Company in 2019. As we experienced in 2018, these included trade wars primarily between the USA and China. Once again, the flight of capital from emerging markets to developed zones has generally been negative for the resources sector, as it has led to both volatility in pricing and exchange rate fluctuations in the currency.

Despite an ever-changing world and business environment, we are again reminded that it is only when we remain focused on making our business a success that we will be able to provide a positive contribution to our stakeholders and the broader society.

Financial performance

As I mentioned in the introduction, 2019 was a difficult year with performance well down from the previous year as a result of poor market conditions and increasing costs.

The financial performance of the Company has been addressed in the Chief Executive Officer’s report and the financial-capital.php section. The Chief Executive Officer has also provided comment on the strategy of the Company going forward and the benefit the Company has gained from its focus on ferrochrome, maximising cash flows from the Venture and the fact that throughout the years the Company has been able to reduce debt to minimal.


As safety remains the number one priority of Merafe and the Venture, it is with great sadness and regret that a fatality at the Venture’s Magareng Mine occurred in February 2019, reported on in August 2019, as a result of a fall of ground incident. This unfortunate event occurred despite the considerable effort that the Venture has placed into embedding a safety culture into its operations. This is demonstrated by the improvement in the total recordable injury frequency rate in 2019. In this regard see the Safety section of this report for further details, as well as the Manufactured capital section.

While the overall safety performance was good, any fatality is unacceptable and the Venture will continue to do all it can to ensure that 2020 is a fatality free year.


We continue to take a long-term view of our business. In terms of achieving our strategic objectives, our ferrochrome interests has again benefited from its investment in the Lion ferrochrome plant and other projects as previously reported. This investment in the Lion ferrochrome plant has improved the Venture’s sustainability by increasing its cost efficiency and production capacity especially in a difficult trading environment. As reported last year we will continue to assess opportunities outside ferrochrome where this makes commercial sense. In this regard see the report of the Chief Executive Officer.

The Board, together with our Venture partners, continue to consider the impact of losing our key empowerment shareholder in 2015. We remain committed to ensuring the long-term sustainability of both Merafe and the Venture and complying with legislation and the challenges brought about by amendments to the Mining Charter and to the BBBEE Codes of Good Practice.

Our approach to sustainability and assurance

The directors have followed the materiality determination processes described in this report and have applied the results of these processes to formulate the material issues in this report. Merafe relies on the Venture and Glencore to obtain quantitative data with regard to sustainability indicators. I refer you to the Sustainability review and assurance summary of this report for information on Merafe and the Venture’s assurance and review processes.

Our commitment to good governance and sustainability has always been reflected in our inclusion in the JSE Socially Responsible Investment (“SRI”) Index since its inception in 2003 with the Company often being a top 10 performer. Since 2015, however, the SRI Index assessment by the JSE was only performed on the Top 100 companies on the JSE by market capitalisation and Merafe falling outside of this was therefore not assessed.

We continue to believe that all companies listed on the JSE need to again be subjected to this assessment as a measure of good governance and should not only be a prerogative of the Top 100 companies.

On an annual basis the Board does a gap analysis of how the Company performed in terms of King IV as well as the steps taken to address issues where the Company was non-compliant. We are pleased to report, while acknowledging that this is work in progress, that the Company in most material respects is compliant with King IV. Where we have fallen short, we have provided an explanation as well as the areas we will focus on in 2020. For more details on our reporting on King IV, I refer you to the Governance section for the full report and compliance analysis.

We agree with the assertion in King IV that good governance has its foundation in effective and ethical leadership and transparency and that integrated thinking and reporting on economic, social and environmental dimensions is key to this. Board decisions need to be made in an integrated manner, understanding the impact on these dimensions as well as the impact on value creation in the short, medium and longer term.

Stakeholder inclusivity and responsiveness is key to the process. We are pleased to note that we have been reporting in an integrated manner and in terms of the Capitals – as recommended by King IV – for some years now.

The Board

As Chairperson of our unitary Board, I am responsible for the overall effectiveness of the Board and its committees and for ensuring that we provide Merafe with effective leadership, uphold ethical standards, and are responsible, accountable, fair and transparent. I am also responsible for ensuring that we implement strategies aimed at achieving our economic, social and environmental performance objectives.

There is a clear separation between my responsibilities and those of the Chief Executive Officer, which is documented in our Board Charter. Our Chief Executive Officer is expected to focus on our business and ensure it is run effectively and in accordance with the strategic decisions of the Board.

We interact at our Annual General Meetings and at presentations made by our executive management team when our interim and annual results are released. This year we again increased our focus on stakeholder relationships and in particular our relationships with our shareholders and our Venture partner. The Board has delegated the responsibility for engagement with our shareholders and potential investors to the Chief Executive Officer and the Financial Director.

The Board is satisfied that it has discharged its responsibilities as set out in the Board Charter.

I convey my thanks to our non-executive and executive directors for their contribution to the Merafe Board’s deliberations and decision-making during 2019.

During the year we said goodbye to Mr Chris Molefe as Chairperson of the Company. Chris retired in May 2019 as he indicated he would in last year’s integrated annual report. Chris oversaw the emergence of Merafe from a start up project to that of an operating entity and partner to Glencore as a leading player in the ferrochrome and chrome industry. We are deeply grateful to Chris for the substantial contribution he made to Merafe over many years and wish him well in his retirement. During the year, we also welcomed Mr Jeff Mclaughlan to the Company as an independent nonexecutive director. Jeff brings many years of experience in the ferrochrome industry to our Board.

Merafe team and Glencore

On behalf of the Board, I would like to thank the Merafe team and our Venture partner, Glencore, for their hard work during 2019, in challenging conditions.

Future outlook

I am again pleased to report that Merafe is as well positioned for the year ahead as it can be for a challenging 2020 with a strong balance sheet and no debt at Merafe level. The Venture is also well positioned for difficult conditions as a result of it being the lowest-cost producer in South Africa. The results, as disappointing as they are, continue to show the benefits of the commitment by the Company in years past to having invested in energyefficient technology.

Abiel Mngomezulu

6 March 2020