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Key sustainability challenges and opportunities

Challenges and opportunities   Our response   The year that was   The future
             
Energy and climate change
             
The challenge            
             

CO2 levels in the atmosphere have reached a record high and are some 40% above levels during the industrial revolution. As economies grow and living standards improve worldwide, energy demand will escalate exponentially.

Demand for coal continues to grow steadily and coal remains the base fuel for energy production.

In South Africa, Eskom is currently building two coal-fired power stations that will increase power generation by 25%, with a concurrent increase in demand for coal.

  

Completion of the EnviNox™ plant reduced our emission of nitrogen oxide, a greenhouse gas, by 98% at our existing nitric acid plant.

Omnia’s new R1,4 billion nitric acid complex in Sasolburg will use bestin- class technology conforming to the highest standards of sustainable environmental development. Plant emissions will be significantly below legislative requirements.

  

The Group did not derive any carbon emission reduction (CER) revenue this year (2010:
R50 million) due to a delay in certification of CERs that were generated.

Construction of the nitric acid complex began during the year, and is progressing as expected.

  

The CERs are expected to be certified during the 2012 financial year, and proceeds from the sale will be included in the income of FY2012.

The complex is expected to be commissioned in the early part of 2012, and will produce some 1 000 tons of nitric acid per day, which equates to 140% of the existing plant’s capacity. The complex is estimated to generate internal cost savings of some R280 million in the first full year of production (operating at 60% capacity level). Ramp-up to full capacity will take place in line with growth in the explosives and fertilizer markets.
             
             
The opportunity            
             
Optimising the efficiency of existing energy consumption processes.   Energy efficiency is critical to meeting South Africa’s growing energy needs. Our new nitric acid production facilities will have co-generation capacity, and will be entirely energy self-sufficient, while contributing about 50% of the current factory’s energy needs, significantly cutting Omnia’s existing electricity supply requirements.   Construction of the nitric acid complex began during the year, and is progressing as expected.   The new facilities will use best-in-class technology conforming to the highest standards of sustainable environmental development. Complex emissions will be significantly below legislative requirements.
             
The increase in the drive for cleaner alternate energy solutions to replace and supplement coal-burning power stations is resulting in increased investment in nuclear energy programmes.   The Mining division is playing a key role by supplying explosives and mining chemicals to uranium mines across the continent, which are used to fuel nuclear power stations. The division is also at the forefront of efforts to recycle oil.   The mining sector recovered strongly post the global financial crisis and demand for all mining commodities continues to increase. Our Mining division has diversified exposure to many commodities across a wide geographical spread and the division’s performance was exceptional.   The possible effects of the Japanese nuclear crisis on the growth of uranium mining remain to be seen.
             

Biofuels are increasingly being seen as a cleaner alternative to fossil fuels.

   The Agriculture division has invested in Jatropha research and development which provides the feedstock for biofuel production. As the plant can be grown on marginally arable land, it does not compromise food security.   The Nalco Africa associate with Protea Chemicals, has introduced chemical process additives into various industrial process applications in South Africa, thereby improving the efficiency of energy utilisation.   Bio-based chemicals and packaging will increasingly be demanded in selected, consumer sensitive markets. Protea Chemicals has aligned itself with a global leader in bio-based packaging raw material for the South African market.
             
    Research is under way on the growth of algae to clean contaminated water and possible use as biofuel.   Algae was grown successfully. Testwork is done in conjunction with the Nelson Mandela Metropolitan University.   Testing will continue and the feasibility of constructing a pilot facility is being investigated.
             
    Research is under way on the possibility of using Paulownia trees to clean contaminated water and generate biofuels.   A number of trees were purchased and are currently being assessed in Omnia Nutriology’s® greenhouses.   Greenhouse trials will be completed and, if successful, trees will be planted and assessed.
             
             
Water quality and availability
             
The challenge            
             
We are seeing increased water scarcity and unsustainable water use as a result of rising populations, increasing standards of living (specifically as dietary patterns change to contain more meat and less grain) and inefficient agricultural practices.   Omnia’s continued commitment to growing our business through proactive management of South Africa’s scarce water resources is reflected through strategic acquisitions and associates in the treatment and responsible use of water resources.   Zetachem undertook a significant modernisation of a key monomer production reactor to ensure its continued ability to provide critical potable water clarification chemicals to the South African market.   The treatment of acid mine drainage provides a significant growth opportunity for Protea Chemicals.
             
             
The opportunity            
             

Water quality is deteriorating in many areas of the developing world as industrial production increases and salinity caused by agriculture and overextraction rises.

   Protea Chemicals and Nalco, the world leader in water treatment and process improvement based in Illinois, USA, have formed an associate, Nalco Africa, that will provide an extensive range of water and process treatment services to the African market.   Nalco Africa has been particularly well received by the South African industrial water treatment market, in its first year of operation winning a number of key supplier awards.   Nalco Africa has, in selected cases, extended its market offering to the running of industrial water plants, taking advantage of its significant technical expertise.
             
  Nalco Africa will provide products and services that include treatments for the mining sector, refinery and petrochemicals sector, pulp and paper industry, food and beverage market and broader industrial and effluent treatment applications.        
             
    The associate will also allow Omnia to help customers reduce their environmental impact using Nalco’s industrial water and process treatment technologies.        
             
    In addition, water management changes have been implemented at our plants, which will optimise water
re-use and decrease municipal water use.		   The first phase of the stormwater management plan is nearing completion.   The second phase of the stormwater management plan will be started.
             
    Zetachem, with its expertise in speciality chemicals and chemical management systems, is able to assist companies and the public sector with effective treatment solutions for potable and industrial water.   The use of a saline cooling tower is being investigated to reduce the volume of contaminated water and save on clean water requirements. This was tested on a small scale.   Complete design of the saline cooling tower system and start installation.
             
    In Sasolburg, we have developed a stormwater management plan and installed infrastructure to separate stormwater run-off from potentially contaminated and clean areas. The capacity of existing stormwater effluent dams in Sasolburg has also been increased at an estimated cost of
R8 million.		        
             
    Omnia Fertilizer, through its proven Nutriology® offering, provides agronomic advice to customers on the conservation and efficient use of water on the farm.        
             
Agronomy and the interests of farmers in Africa
             
The challenge            
             
The FAO (Food and Agriculture Organisation of the UN) states that by 2050, world food production will have to rise by 70%, of which 80% is projected to result from increases in yield and cropping intensity in developing countries.   The agriculture sector has taken on a new and more critical role in today’s global economy in providing solutions to rising concerns on food security for a growing world population, as dietary habits change in developing economies and declining arable land availability fails to meet escalating demand. Demand for fertilizer continues to grow in response to the need for higher yields due to increasing urbanisation, less available arable land worldwide, and the likely development of biofuels in southern Africa.   The FAO food price index rose to its highest level ever. World stocks for major grains remain extremely low, a major risk given the current global weather volatility.  
             
    In Africa, farmers only apply 10% of the global average fertilizer per hectare. Omnia’s agronomic expertise is extensive and supports optimal fertilization, while our knowledge of the African agricultural environment enables us to provide practical and sustainable solutions to issues of food security.   The year saw fundamental changes in the southern Africa fertilizer industry, with two major suppliers exiting the retail arena. These changes have provided a major opportunity to remaining fertilizer companies. Omnia Fertilizer reacted immediately, successfully selling larger volumes into the marketplace.    
             
             
The opportunity            
             
South Africa has been a net importer of food since 2000, and innovative approaches are required to remedy the shortfall in food production.  

For SA to become more self-sufficient in producing food, it is critical that new approaches are found to use the country’s arable land more effectively – Omnia’s expertise in developing high-performance nutrients provide one such solution.

In addition, Omnia continues to invest in research laboratory facilities and new technologies, including silica research and its potentially favourable implications for crop production as a fertilizer ingredient.

Development work in this area includes:

› Ground-penetrating radar to map the spatial distribution of soil water content in a particular field.
› Silica has been shown to activate genes that stimulate the immune systems of plants, helping them withstand disease and climatic stress.
› Trials on hydroponic tomatoes confirmed that phosphites have the ability to limit the severity of diseases and reduce the rate at which they infect the plant. The benefit in terms of crop performance is greater root development and an increase in marketable fruit.
  The Omnia Nutriology® model continues to be agronomically driven. This entails the use of a large team of agronomic specialists supported by competent technological services. During the review period, all three laboratories at the Sasolburg facility received ISO 17025 certification for specific element analysis, including analysis of potential harmful elements (heavy metals). In addition to rigorous product quality control testing, the laboratories perform raw material, microbial, soil and plant sap analysis. This uniquely positions the Omnia laboratories to certify products according to stringent European GAP requirements.  

Focus will continue on research and development, both in product innovation and agronomic technologies to optimise use of productive lands and further improve customer yields per hectare. Emerging farmer focus is also a critical area, which has significant opportunities to improve yields and to make the smaller farming operation sustainable.

ISO 17025 accreditation will be expanded to include a number of additional analyses. The laboratories will again be equipped with additional state-of-the-art equipment, improving accuracy and increasing throughput capacity.
             
South Africa’s agricultural capacity is under strain as it tries to meet its transformation objectives. Effective ways are needed to assist subsistence farmers become small-scale entrepreneurs.  

Omnia’s Agriculture division is implementing collaborative, integrated approaches to facilitate the development of emerging farmers to fully take up their role in the South African agricultural sector as commercially viable and sustainable businesses.

 

   Omnia has a dedicated unit focused on the entire business of the emerging farmer. This unit was involved in several projects during the year. One such project was Omnia managing the finance and agronomical risk management on behalf of the LandBank.   Timing of funding remains critical for success in this region. Various alternatives are being reviewed to expedite input funding. Omnia intends to further strengthen the emerging farmers’ agronomic team to allow for geographical expansion.
    Developed by Omnia’s Agriculture division to create a favourable soil environment and manage the life cycle of crops to increase production and improve farmer profitability, our Nutriology® training is instrumental in creating strong, sustained relationships between Omnia and our emerging agricultural customers.        
             
             
Managing the skills shortage
             
The challenge            
             
South Africa faces a well-documented skills shortage in many sectors. According to an Ernst & Young report released in 2008, the shortage of skills in the mining industry is so acute that it is likely to persist even if 5% to 10% of new projects are halted.   Against a backdrop of increasing mobility in an era of globalisation and acute shortages of technical skills, we are meeting this challenge by developing a pipeline of talent through training interventions and by fast-tracking high-potential achievers.  

The first intake of employees to participate in the Fundamental Management Programme (FMP) and the Programme for Management Development (PMD) at GIBS graduated. The Action Learning Projects were of high standard.

BME embarked on the establishment of a training centre on the Douglas site to address the training needs within the surface mining environment. The process to obtain accreditation for the training centre was initiated.

Omnia Fertilizer applied for accreditation from the CHIETA as a workplace for apprenticeship training. The application was in the areas of Control and Instrumentation, Welding and Boilermaking. Accreditation was awarded for the latter two artisan disciplines.

  

The second intake of students for the 2011 Programme for Management Development (PMD) has been identified, and 20 employees have been selected to participate in the programme. The orientation day took place in February 2011. The programme will run over a period of 12 months as opposed to the initial programme which ran over a period of 18 months. Action learning programmes are once again an integral part of the learning experience.

BME will complete the accreditation process and will be in a strong position to offer accredited skills programmes and learnerships.

Omnia Fertilizer has received workplace accreditation for artisan training in Control and Instrumentation and will proceed with artisan training in the three disciplines that accreditation was awarded in.
             
             
The opportunity            
             
Best-practice personal and career development are powerful attraction and retention incentives.  

Training offered through the Omnia Academy of Learning has been expanded. The academy delivers training developed by the company to meet the specific demands of the business and ensure knowledge is transferred across the Group to enhance skills.

In addition, a skills deficit in the explosives industry, which has resulted in outsourcing skilled explosives handling to companies such as BME, has motivated the company to contribute to the development of the local skills base by establishing a skills training centre near eMalahleni.

  

Personal skills development courses were well supported by employees, in addition to the courses on management, personal and interpersonal effectiveness, selling skills, presentation skills and finance for non-financial managers.

Employees participated actively in learnerships and part-time studies. Three TOPP students completed their articles.

  

Continued effort will be put into individual development of employees. Part-time studies are an area of focus. Employees are encouraged and supported financially through loans and bursaries. Protea Chemicals has embarked on a drive to upskill the marketing competency within the division through training programmes to enhance sales, skills and coaching programmes.

Throughout the organisation mentoring and coaching will be initiatives that receive a lot of attention and emphasis.

Omnia Academy courses, including Managing for Results, Leadership Development as well as Supply Chain principles, will be continued as part of the process to upskill and develop our employees.