Electricity price hikes : managing for sustainable value creation in a mining company

Abstract

Companies are faced with challenges constraining the achievement of set budgets, goals, profit and cost of product, to name a few, on a daily basis. These challenges influence value creation and sustainable value creation. Value-based management is an integrated management tool which may assist in achieving sustainable value creation within a company. Achieving sustainable value creation will result in benefits for both the shareholders and the various stakeholders. In 2008 and 2009 Eskom, South Africa’s sole electricity provider announced a major shortage of electricity and consequently major price increases. Since electricity consumption is a crucial part of the production process, this announcement had a devastating effect on mining companies. The primary objective of the current study is to investigate whether a local mining company is focusing on applicable endeavours to overcome the electricity constraint and price hikes in order to sustain value creation. This was done by studying the company’s financial & management reports, public announcements and media coverage, in conjunction with a quantitative study, collecting primary data by using standardised questionnaires distributed among the mining company’s employees. The results from this study indicate that the selected company is focusing on relevant projects to overcome the electricity constraints. Further, the conclusion made from the results of the questionnaires shows that the higher staff levels are more informed and aware of value-based management. It also points out that the lower levels and employees from the production and mining departments are less informed and aware of value-based management.