Performance archive

2014

AECI’s management of SHE-related issues is guided by a formal SHE policy, with performance being measured in a framework of supporting standards. The policy and standards, are agreed to and approved by the Chief Executive and are reviewed periodically by the Social and Ethics Committee.

In many cases it is appropriate for businesses and/or operating sites to align their SHE management systems with an external standard against which third-party audits may be undertaken. The most commonly adopted such standards are:

OHSAS 18 001 (an internationally applied British health and safety management standard);

ISO 14 001 (an international environmental management standard);

NOSA 5 star (a South African SHE management system); and

Responsible Care. This is the global chemical industry’s voluntary initiative for the continual improvement of performance in safety, health and environmental practices.

For most of its operations, AEL makes use of its in-house World Class system which comprises seven elements including health and safety, and the environment. A table providing details of SHE-related accreditations and, for AEL.

INVESTOR-RELATED INITIATIVES

AECI is involved with three sustainability-related initiatives aimed specifically at investors. These are the JSE SRI Index, the CDP and the CDP Water Program. The latter two are global programmes administered in South Africa by the National Business Initiative.

In 2014 AECI was included in the SRI for the sixth successive year. In the CDP the Company was placed in the “B” performance band, with a carbon disclosure score placing it 29th of the 76 participating companies – an improvement of two positions from 2013’s score. While the CDP Water Program does not produce company-by-company comparisons at this time AECI again participated in the initiative, thereby making the relevant information available in the public domain.

The sustainability key performance indicators that follow have been measured and reported using AECI’s internal standards and guidelines, which are available on request.

ENVIRONMENTAL PERFORMANCE

Water consumption reduced by 20% to 3 336 099 m3* (2013: 4 175 710 m3*). This reduction was achieved mainly at AEL and predominantly due to the plant closure already referred to, and discontinuation of safety fuse production at the Mankwe site.

The generation and disposal of hazardous waste reduced by 15% to 4 286 tonnes* (2013: 5 034 tonnes*). This decrease was largely in the specialty chemicals cluster’s operations. The two primary contributors were a reduction in plant shutdowns at CI, which also implemented a more rigorous waste segregation process, and a reduction in the quantity of unsaleable product at Experse requiring disposal.

Recycled waste increased by 20% to 16 049 tonnes* (2013: 13 326 tonnes*). This resulted from the shutdown of a process plant at an operating subsidiary. A byproduct stream, previously used as a feedstock for this process, is now recycled by a third-party composting company.

WATER USAGE (m3)   WATER USAGE BY SEGMENT (%)
WATER USAGE (m3)   WATER USAGE BY SEGMENT (%)
HAZARDOUS WASTE GENERATION (TONNES PER YEAR)   HAZARDOUS WASTE GENERATION BY SEGMENT (%)
HAZARDOUS WASTE GENERATION (TONNES PER YEAR)   HAZARDOUS WASTE GENERATION BY SEGMENT (%)
RECYCLED WASTE (TONNES PER YEAR)   RECYCLED WASTE BY SEGMENT (%)
RECYCLED WASTE (TONNES PER YEAR)   RECYCLED WASTE BY SEGMENT (%)

* Indicates limited assurance.

ENVIRONMENTAL INCIDENTS

The prevention of incidents detrimental to the environment is an important aspect of AECI’s approach to managing its impact. Such incidents do occur, though, and are classified and reported internally in line with AECI’s reporting standards and guidelines. Only one serious incident* occurred during 2014 (2013: one serious incident*): at AEL’s Bissa site in Burkina Faso a chemical spill occurred as a consequence of civil unrest. Clean-up was effected as required, with no lasting damage to people or the environment.

ENVIRONMENTAL COMPLIANCE

In 2011 the Department of Water Affairs (“DWA”) issued a new Water Use License for the Group’s operations at the Modderfontein site. This site had been operating for some years under a draft Water Use License. The new License was issued with stringent conditions which was the site was not immediately able to comply with. Commencing in 2012, in full consultation and with the assistance of the DWA, a suite of projects was commissioned to improve the level of compliance with License conditions. These projects have been completed and during 2014 approval was negotiated for most of the amendments to the License. Negotiations with the relevant current authority, namely the Department of Water and Sanitation, on this matter continue in a spirit of cooperation to finalise the situation in a mutually satisfactory manner.

AEL has advised the National Air Quality Officer of its intention to apply for a five-year postponement with respect to compliance with the 2015 minimum emission limits for certain manufacturing plants at its Modderfontein site. An air impact study and the first phase of the requisite public participation process have been completed. The postponement motivation, together with a five-year action plan, was submitted to the National Air Quality Officer.

ALL WORKERS TRIR   ALL WORKERS OCCUPATIONAL ILLNESS RATE
ALL WORKERS TRIR   ALL WORKERS OCCUPATIONAL ILLNESS RATE

SAFETY AND HEALTH PERFORMANCE

This is expressed as the Total Recordable Incident Rate (“TRIR”). The TRIR measures the number of incidents per 200 000 hours worked. It was most pleasing that AECI achieved its best-ever safety and health performance with a year-end TRIR of 0,50* (2013: 0,52). There were no fatalities in 2014*.

Tragically an AEL employee sustained fatal injuries on 22 January 2015 as a result of a motor vehicle collision on a public road while en route to a customer.

The occupational illness rate was 0,02*, unchanged* year-on-year. One case of asthma and one of dermatitis were recorded.

AECI compares its safety and health performance to that of its peers. The graph below was compiled by an independent consultant from the latest publicly available data from the various companies’ websites at the time of writing.

TRIR PERFORMANCE COMPARISONS
TRIR PERFORMANCE COMPARISONS

PROCESS SAFETY

Process Safety Management (“PSM”) is focused on the prevention of explosions and significant chemical releases – issues of obvious concern to a company that manufactures and trades in explosives and a range of specialty chemicals. AECI began rolling out a formal PSM system in 2012 and substantial progress has been made by Group businesses in implementing good practices in identified areas of concern.

In terms of safety, the tragic road incident at the start of 2015 serves as a sobering reminder that, despite another year of improvement in the Group’s health and safety performance, there remains a level of inherent risk to employees that requires constant vigilance. During 2015 the Group will continue to learn from the causes of the incidents that do occur in order to improve further in this critical area.

Title File size
   
Formally recognised unions [PDF - 57KB]

2013

ENVIRONMENTAL PERFORMANCE
 
ENVIRONMENTAL PERFORMANCE
 
ENVIRONMENTAL PERFORMANCE

ENVIRONMENTAL PERFORMANCE

Water consumption reduced by 25% to 4 175 710m3 * (2012: 5 582 606m3 *). This reduction was achieved largely in AEL’s operations and related to lower production at Modderfontein and at sites in Zambia.

Hazardous waste generation increased by 6% to 5 034 tonnes * (2012: 4 753 tonnes *). This increase was mainly in AEL’s operations, with high production output in North and West Africa and, regrettably, an increase in spillages.

Where practicable, Group businesses recycle the waste generated by their operations. The sources of this type of waste typically includes packaging materials, ash and scrap metal. The quantity of waste recycled by the Group decreased by 2% year-on-year to 13 326 tonnes * (2012: 13 597 tonnes) predominantly due to a decrease in ash generated by AEL as a result of lower coal consumption.

ENVIRONMENTAL INCIDENTS

The prevention of incidents detrimental to the environment is an important aspect of AECI’s approach to managing its environmental impact. Such incidents do occur, though, and are classified and reported internally as per AECI’s reporting standards and guidelines (available on request). Only one * (none * in 2012) of these incidents during 2013 was classified as serious. This incident occurred at AEL’s Mufulira site, in Zambia. See AEL’s operational review for further details in this regard.

CARBON FOOTPRINT

TONNES OF CO2. EQUIVALENT: SCOPE 1

    2009   2010   2011   2012   2013  
  Explosives 216 000   219 310   201 499   188 610   226 946  
  Specialty chemicals 15 500   24 665   59 801   30 252   26 861  
  Property 67 000   65 940   68 075   62 685   76 015  
  Specialty fibres 500   976   534   341   **  
  AECI TOTAL 299 000   310 891 *   329 909 *   281 888 *   329 822 *  

 

TONNES OF CO2. EQUIVALENT: SCOPE 2

    2009   2010   2011   2012   2013  
  Explosives 71 000   77 768   76 622   76 277   78 170  
  Specialty chemicals 80 700   103 446   135 297   115 553   124 009  
  Property 6 300   10 050   8 315   6 863   7 378  
  Specialty fibres 19 400   25 041   27 335   25 672   **  
  AECI TOTAL 177 400   216 305 *   247 569 *   224 365 *   209 557 *  
  AECI TOTAL (SCOPE 1 AND 2) 476 400   527 196 *   577 478 *   506 253 *   539 379 *  

** Included in specialty chemicals.

ELECTRICITY USAGE BY BUSINESS SEGMENTENVIRONMENTAL COMPLIANCE

In 2011, the DWA issued a new Water Use Licence for the Group’s operations at the Modderfontein site. This site had been operating for some years under a draft Water Use Licence. The new Licence was issued with stringent conditions and the site was not immediately able to comply with all of these. Commencing in 2012, in full consultation and with the assistance of the DWA, a suite of projects was commissioned to improve the level of compliance with Licence conditions. The majority of these projects had been completed by the end of 2013. Negotiations with the DWA on this matter continue in a spirit of cooperation to finalise the situation in a mutually satisfactory manner.

CARBON FOOTPRINT

The term “carbon footprint” is defined as the total greenhouse gas emissions caused directly and indirectly by an individual, organisation, event or product, and is expressed as tonnes of carbon dioxide (“CO2”) equivalent. AECI’s carbon footprint has been calculated using the 2006 Intergovernmental Panel on Climate Change Guidelines for National Greenhouse Gas Inventories and the Greenhouse Gas Protocol’s Corporate Accounting and Reporting Standards, as developed by the World Business Council for Sustainable Development. Details on the operating and organisational boundaries used to calculate AECI’s carbon footprint.

* Indicates limited assurance.

The increase in total CO2e is primarily attributable to a significant increase in Scope 1 emissions from the explosives business. Process-related CO2e emissions at AEL increased by 20% due to increased nitrous oxide (“N2O”) emissions from the No. 9 Nitric Acid Plant at Modderfontein subsequent to the suspension of the Clean Development Mechanism project and the removal of the secondary catalyst used to abate N2O. The suspension of the project was due to the low price of Certified Emission Reductions (more commonly known as carbon credits) and the high cost of leasing catalysts.

The majority of Scope 2 emissions arose from electricity consumption. The AECI Group used 202 365MWh * of electricity in 2013 (2012: 215 401MWh *). The decrease occurred primarily in the specialty chemicals cluster as a result of lower production volumes, the sale of Resitec at the end of 2012 and a range of energy-saving initiatives that were put in place as part of Green Gauge.

AECI’s total energy usage during 2013 was 2 384 571GJ * (2012: 2 659 107GJ *).

SAFETY AND HEALTH PERFORMANCE

Safety and health performance is expressed as the Total Recordable Incident Rate (“TRIR”). The TRIR measures the number of incidents per 200 000 hours worked.

AECI has achieved its best-ever safety and health performance with a year-end TRIR of 0,52 * (2012: 0,53 *). There were no fatalities *.

Occupational illnesses in 2013 halved * year-on- year. There was one case of occupational dermatitis and one of noise-induced hearing loss.

TRIR BY SEGMENT

    Employees   Contractors   Combined  
  Explosives 0,38   0,36   0,37  
  Specialty chemicals 0,78   0,81   0,78  
  Property 0,48   0,64   0,60  
  AECI GROUP 0,51   0,56   0,52 *  

ALL WORKERS TRIR   ALL WORKERS OCCUPATIONAL ILLNESS RATE

All three business segments achieved incident rates below the 2013 TRIR Maximum Tolerable Level of 0,80.

AECI benchmarks its safety and health performance against its peers. The graph below was compiled by an independent consultant from the latest publicly available data from the various companies’ websites at the time of writing.

PROCESS SAFETY

Process Safety Management is focused on the prevention of explosions and significant chemical releases, an issue of obvious concern to a Company that manufactures and trades in explosives and a range of specialty chemicals. AECI began rolling out a formal process safety management system in 2012 and progress has been made by Group businesses in implementing good practices in identified areas of concern.

OPERATING AND OPERATIONAL BOUNDARIES USED TO CALCULATE AECI’S CARBON FOOTPRINT

Scope 1 direct emissions – emissions from the consumption of fuel in mobile equipment; emissions from the consumption of fuel in stationary equipment; emissions released from processes occurring at operations; refrigerant usage in air conditioners and refrigeration equipment;

Scope 2 indirect emissions – emissions which arise from the generation of purchased electricity and purchased steam consumed by the Group.

In terms of organisational boundaries, the financial control approach was followed whereby all operations under the financial control of AECI were included in the carbon footprint boundary and 100% of emissions from their operations were accounted for.

The organisation boundaries for the carbon footprint were determined as follows:

All significant AEL operations, together with the footprint associated with rock-on-ground contracts. AEL’s international operations were also included. Although South African emissions factors relating to electricity generation were used throughout, there was no material impact on the resultant figures; the impact of process emissions from nitric acid production at Modderfontein was calculated using a factor of 310 which is the global warming potential for nitrous oxide (N2O); emissions resulting from the burning of emulsion wastes have not been included due to reporting difficulties;

Specialty chemical operations – South African emission factors were used for all calculations except for the operations of STF in the USA in which case the emissions factor for Duke Power Utility (STF’s electricity provider) was used due to its significant impact on the final result; and

All Heartland operations, which are all in South Africa.

Accreditations

Title File size
   
Accreditations [PDF - 55KB]

2012

SHE MANAGEMENT

AECI’s management of SHE-related issues is guided by this formal SHE policy, with performance being measured within a framework of supporting SHE standards. The policy and standards, which are agreed to and approved by the Chief Executive, are reviewed periodically by the Social and Ethics Committee on behalf of the Board to ensure that they remain appropriate for AECI’s diverse businesses and the changing operating environment.

AECI comprises a broad spectrum of businesses, ranging from large manufacturing plants producing explosives and chemicals, to small operations on customer sites which provide application services as well as property leasing and development activities. Many of the Group’s operational sites are outside of South Africa, sometimes in relatively underdeveloped countries. Consequently, SHE-related issues faced by the 17 businesses in the portfolio are diverse. It is inevitable therefore that a certain degree of generalisation occurs when commenting on such varied activities in a single report.

GREEN GAUGE

In 2011 AECI introduced Green Gauge, a framework of Group-wide environmental objectives and targets. The framework is based on six Key Focus Areas (“KFAs”) and progress in each is summarised below.

KFAs 1 and 2:
Resource and Energy Conservation

Resource efficiency assessments were conducted at 14 Group sites in South Africa during 2012, bringing the total number of sites assessed since the pilot programme began at the end of 2011 to 15.

ERM, a leading international sustainability consultancy, was commissioned by AECI to apply its proprietary methodology to identify opportunities for energy, water and waste savings. The primary focus was the identification of low- and no-cost savings entailing operational changes which are generally quick to implement. A full range of opportunities, including those requiring moderate to high investments, were also identified and documented for each site.

After technical verification of the opportunities identified, the sites engaged in a process to set reduction targets based on realistically achievable goals. Progress against these is being monitored by the AECI Executive Committee.

KFA 3:
Chemical Substances Management

Prevention of adverse health effects and environmental impacts is the primary focus of this KFA. The Group aims to formalise a system that meets regulatory requirements while simultaneously enabling business growth. This approach is in line with good product stewardship, one of the Management Practice Standards of Responsible Care™.

The International Council of Chemical Associations (“ICCA”) represents the global chemical industry. This association has made a commitment to the United Nations Strategic Approach to International Chemicals Management programme.

The programme, adopted in 2006, is a policy framework aimed at fostering the sound management of chemicals. To implement this framework, the ICCA developed the Global Product Strategy (“GPS”). The GPS consists of a range of regulations and voluntary initiatives, aimed at harmonising product safety assessments around the world. AECI has included this approach in its own chemical substances management programme. Businesses in the Group undertook the initial phase of the GPS process towards year-end and inventories of product safety information have been developed.

KFA 4:
Remediation

The guiding principles underlying AECI’s land remediation activities are to protect human health and the environment and to use good science, proven concepts and the best available cost-effective technologies. Stakeholder communication in the remediation process is vital and as such AECI cooperates with regulatory authorities and shares information with interested and affected parties on a regular basis.

Human health and environmental risk assessments are undertaken at appropriate stages of individual projects. These assessments influence subsequent activities. Largely due to lower than expected land sales, little remediation work was carried out during 2012. Extensive monitoring of environmental conditions throughout the Group continued, however.

Expenditure on remediation and related environmental management activities amounted to R8 million for the reporting period. At 31 December 2012, the Group’s environmental liability for remediation was estimated at R155 million. This is considered by the Company to be adequate and has been fully provided for in the annual financial statements.

KFA 5:
Capacity Building

While technical interventions and strategies are critical for the successful implementation of Green Gauge and the achievement of targets, it is imperative that these initiatives be supplemented by appropriate social awareness, education and communication campaigns across the Group and all employment levels. Accordingly, training and awareness sessions have been implemented using a Train-the-Trainer approach. SHE Practitioners were trained to conduct appropriate awareness sessions, for both technical and non-technical employees, in their own companies.

The focus in 2012 was on AECI’s businesses in South Africa. In 2013, concerted efforts will be made to extend the programme to sites in other countries.

KFA 6:
Management Aspects

To ensure that agreed targets for identified Green Gauge interventions and actions are met, accountability for their progressive implementation is required. To this end, AECI has ensured that responsibility in this regard is vested in appropriate Group management levels.

MANAGEMENT SYSTEMS AND STANDARDS

In addition to Green Gauge, in many cases it is also appropriate for businesses and/or individual sites to align their SHE management systems with an external standard against which third-party audits can be undertaken. The most commonly adopted such systems are:

OHSAS 18001 (an international health and safety management standard);

ISO 14001 (an international environmental management standard);

NOSA 5 Star (a South African SHE management system); and

Responsible Care™. This is the global chemical industry’s voluntary initiative for the continual improvement of performance in safety, health and environmental practices. It is a public commitment to the responsible management and stewardship of products and services through their life cycle.

Responsible Care™ was launched by the Canadian Chemicals Producers Association in 1984 and has since been adopted in 55 countries. The Chemical and Allied Industries’ Association (“CAIA”) is the custodian of Responsible Care™ in South Africa, with 145 South African businesses being signatories. The Responsible Care™ standing committee, currently chaired by an AECI Senior Manager, is responsible for guiding the programme.

AECI is a signatory to Responsible Care™, as is AEL in South Africa. All South African-based businesses in the speciality chemicals cluster are also signatories in their own right. Local signatories have their compliance with the Management Practice Standards verified by independent third party auditors. The majority of signatory companies in the Group have been audited successfully against these Standards.

For most of its operations, AEL makes use of its in-house World Class system which is comprised of seven pillars – safety and health being one and the environment another. Operations are rated annually by auditors employed centrally by AEL. The intention is to have all AEL sites to which this system applies at a minimum standard of Half Gold.

The table below provides details of SHE-related accreditations and, for AEL, the level of achievement by individual sites of World Class system standards.

AEL CERTIFICATIONS

  SITE     LOCATION     WORLD
CLASS
AWARDS
    ISO
14001
CERTIFIED
 
  East London     South Africa     Half Gold     YES  
  Eland     South Africa     Half Gold     NO  
  Emalahleni     South Africa     Half Gold     YES  
  Kimberley     South Africa     Half Gold     YES  
  Klerksdorp     South Africa     Half Gold     YES  
  Limeacres     South Africa     Half Gold     YES  
  Mankwe     South Africa     Half Gold     YES  
  Modderfontein     South Africa     NO     YES  
  Mogalakwena     South Africa     NO     YES  
  Musina     South Africa     Silver     YES  
  Nelspruit     South Africa     Half Gold     YES  
  New Vaal     South Africa     Half Gold     YES  
  O'kiep     South Africa     Half Gold     NO  
  QS Northern Region     South Africa     Half Gold     YES  
  Sishen     South Africa     Half Gold     NO  
  Somerset West     South Africa     NO     YES  
  South Deep     South Africa     Half Gold     NO  
  Steelpoort     South Africa     NO     YES  
  Target 1     South Africa     Half Gold     NO  
  Target 2     South Africa     Half Gold     NO  
  Thabazimbi     South Africa     Half Gold     YES  
  Voorspoed     South Africa     Half Gold     NO  
  Westville     South Africa     Half Gold     YES  
  Jwaneng     Botswana     Half Gold     YES  
  Letlekhane     Botswana     Half Gold     YES  
  Orapa     Botswana     Half Gold     YES  
  Essakane     Burkina Faso     Silver     NO  
  Inata     Burkina Faso     Silver     NO  
  Semafo     Burkina Faso     Silver     NO  
  Kolwezi     DRC     Silver     NO  
  Ruashi     DRC     Silver     NO  
  Tenke Fungurumme     DRC     Half Silver     NO  
  Sukari     Egypt     Half Gold     NO  
  Ayanfuri     Ghana     NO     NO  
  Bogoso     Ghana     NO     YES  
  Damang     Ghana     NO     YES  
  Obuasi     Ghana     NO     YES  
  Tarkwa     Ghana     NO     YES  
  Wassa     Ghana     NO     YES  
  Lefa     Guinea     Silver     NO  
  Siguiri     Guinea     Silver     NO  
  Balikpapan Office     Indonesia     Half Gold     NO  
  Bengalon     Indonesia     Half Gold     NO  
  Gunung Bayan     Indonesia     Half Gold     NO  
  Jakarta Office     Indonesia     Silver     NO  
  Melak     Indonesia     Half Gold     NO  
  MSI Separi     Indonesia     Silver     NO  
  Santam     Indonesia     Half Gold     NO  
  Sengata     Indonesia     Half Gold     NO  
  Syama     Mali     Silver     NO  
  Namibia     Namibia     Half Gold     NO  
  Eldington     Zimbabwe     NO     YES  
  Harare     Zimbabwe     NO     YES  
  Ngezi     Zimbabwe     Half Gold     YES  
  Sutton     Zimbabwe     NO     YES  
  Lumwana     Zambia     Half Gold     NO  
  Mufulira     Zambia     Half Gold     YES  
  UBS Mufilira     Zambia     Half Gold     YES  
  UBS Nkana     Zambia     Half Gold     YES  

OTHER GROUP COMPANY CERTIFICATIONS

  BUSINESS     SITE     LOCATION   ISO
14001
CERTIFIED
  OHSAS
18001
CERTIFIED
  NOSA
CERTIFIED
  RESPONSIBLE
CARE™
 
  Akulu     Chloorkop     South Africa   YES   YES   N/A   YES  
  Akulu     Mobeni     South Africa   YES   YES   N/A   YES  
  Chemfit     Chloorkop     South Africa   NO   NO   NO   YES  
  CI     Chamdor     South Africa   YES   YES   N/A   YES  
  CI     Umbogintwini     South Africa   YES   YES   N/A   YES  
  ChemSystems     Chloorkop     South Africa   YES   YES   N/A   YES  
  Crest     Cape Town     South Africa   NO   NO   NO   NO  
  Crest     Midrand     South Africa   NO   NO   NO   YES  
  Crest     Prospecton     South Africa   N/A   N/A   YES   NO  
  Heartland     Modderfontein     South Africa   N/A   N/A   N/A   N/A  
  Heartland     Somerset West     South Africa   N/A   N/A   N/A   N/A  
  Heartland     Umbogintwini     South Africa   YES   YES   N/A   YES  
  IOP     Jacobs     South Africa   YES   YES   N/A   YES  
  IU     Umbogintwini     South Africa   NO   NO   NO   YES  
  Chemisphere     Modderfontein     South Africa   NO   NO   NO   YES  
  Chemisphere     Olifantsfontein     South Africa   YES   YES   N/A   YES  
  Lake     Cape Town     South Africa   NO   NO   NO   NO  
  Lake     Natalspruit     South Africa   N/A   N/A   YES   YES  
  Lake     Umbogintwini     South Africa   YES   YES   N/A   YES  
  Nulandis     Lilianton     South Africa   YES   YES   N/A   YES  
  Nulandis     Modderfontein     South Africa   NO   YES   N/A   YES  
  Nulandis     Paarl     South Africa   YES   NO   NO   YES  
  Resinkem     Umbogintwini     South Africa   NO   NO   NO   YES  
  Senmin     Pretoria     South Africa   NO   NO   NO   NO  
  Senmin     Sasolburg     South Africa   YES   N/A   YES   YES  
  SMSA     Merebank     South Africa   NO   NO   NO   YES  
  STF     Stoneville     USA   NO   NO   NO   N/A  

INVESTOR-RELATED INITIATIVES

AECI is involved with three sustainability-related initiatives aimed specifically at investors. These are the JSE SRI Index, the CDP and the WDP. The latter two are global programmes administered in South Africa by the National Business Initiative.

The JSE established the SRI index in 2004. Initially only the Top 40 companies were assessed automatically. The automatic assessment of mid-caps, including AECI, followed in 2009. With the addition of some small-caps, a total of 108 potential Index constituents were measured in 2012. The evaluation process considers companies’ management systems as well as performance and disclosure in the areas of environment, society, governance and climate change.

In 2012, 76 companies were included in the Index. 90% of the Top 40 qualified while the success rate for mid-caps was 55%. AECI was included for the fourth successive year.

The CDP is an international voluntary disclosure programme. Data on greenhouse gas (“GHG”) emissions and climate change response actions by business are collated on behalf of global investors who collectively manage assets of US$78 trillion. In 2012, the JSE Top 100 companies were invited to submit data. 76 companies did so and AECI participated for the fourth consecutive year. The WDP is a newer global programme aimed at catalysing sustainable corporate water management. In 2012, the JSE Top 100 companies were invited to submit their data and AECI took part in this submission for the second time.

ENVIRONMENTAL PERFORMANCE

The sustainability key performance indicators that follow have been measured and reported using AECI’s internal standards and guidelines which are available on request.

Water usage

It is becoming increasingly well-recognised that fresh water is a scarce resource. This is particularly the case in sub-Saharan Africa, where the majority of the Group’s operations are based. AECI is committed to using water responsibly and to recycling it where this is practical. The resource efficiency assessments that form part of the Green Gauge programme are aimed at improving the Group’s performance in this area.

Water consumption was 18% higher than that in 2011 (4 748 000m3*) and totalled 5 583 000 m3* (* Indicates limited assurance). The primary reason for this increase was AEL’s higher year-on-year usage, which is related largely to greater volumes of emulsion explosives produced owing to customer demand in Africa. In addition, AEL commissioned eight new operational sites in Africa and Indonesia.

Heartland recorded a 24% decrease in water consumption as a result of the implementation of a range of water conservation projects as well as reduced customer demand for steam.


Hazardous waste

It is pleasing to report that the quantity of hazardous waste generated by the Group’s operations decreased by 20% year-on-year, falling to 4 753 tonnes* (2011: 5 920 tonnes*). The biggest contributor to this was AEL which achieved a 55% reduction in hazardous waste generation, largely due to:

rationalisation of the use of certain sulphuric acid storage tanks, which allowed for greater storage capacity of slower-moving sulphuric acid inventories and resulted in a significantly lower quantity of acid waste;

less tank de-sludging than in 2011;

fewer unscheduled shutdowns at ISAP;

improved emulsion quality, which reduced the need for cleaning mobile manufacturing units and storage silos; and

closure of production facilities at two sites.

Targets for waste reduction activities are now being set at site level as part of the Green Gauge programme.

Environmental incidents

It is also very pleasing to state that for the first time no* serious or major environmental incidents were reported in the Group during 2012. Six* serious incidents occurred in 2011. This improvement was attributable to a net reduction in incidents as a whole, as well as improved emergency response to mitigate any effects of incidents.

Environmental compliance

In 2011, the DWA issued a new Water Use Licence for the Group’s operations at the Modderfontein site. This site had been operating for some years under a draft Water Use Licence. The new licence was issued with stringent conditions and the site was not immediately able to comply with all of these. During 2012, in full consultation and with the assistance of the DWA authorities, substantial progress was made on a suite of projects aimed at improving the site’s level of compliance with the licence conditions and these efforts will continue in 2013 and beyond. The overall impact of these interventions is yielding the desired result toward achieving full compliance. Negotiations with the DWA on this aspect continues in a spirit of cooperation in a bid to resolve the situation in a mutually satisfactory manner.

Carbon footprint

The term “carbon footprint” is used to describe the total quantity of carbon dioxide (“CO2”) and other GHG emissions for which an organisation is responsible. AECI’s carbon footprint has been calculated using the 2006 Intergovernmental Panel on Climate Change Guidelines for National Greenhouse Gas Inventories and the Greenhouse Gas Protocol’s Corporate Accounting and Reporting Standards, as developed by the World Resources Institute and the World Business Council for Sustainable Development.

CARBON FOOTPRINT

                     
  Tonnes of CO2 equivalent               SCOPE 1  
      2009   2010   2011   2012  
  Explosives   216 000   219 310   201 499   188 610  
  Specialty chemicals   15 500   24 665   59,801   30 252  
  Property   67 000   65 941   68,075   62 685  
  Specialty fibres   500   976   534   341  
  AECI TOTAL   299 000   310 892*   329 909*   281 888*  
                     
  Tonnes of CO2 equivalent               SCOPE 2  
      2009   2010   2010   2012  
  Explosives   71 000   77 768   76 622   76 277  
  Specialty chemicals   80 700   103 446   135 297   115 553  
  Property   6 300   10 050   8 315   6 863  
  Specialty fibres   19 400   25 041   27 335   25 672  
  AECI TOTAL   177 400   216 305*   247 569*   224 365*  

In terms of the operating boundaries of the carbon footprint the following were included:

Scope 1 direct emissions – emissions from the consumption of fuel in mobile equipment; emissions from the consumption of fuel in stationary equipment; emissions released from processes occurring at operations; refrigerant usage in air conditioners and refrigeration equipment;

Scope 2 indirect emissions – emissions which arise from the generation of purchased electricity and purchased steam consumed by the Group.

In terms of organisational boundaries, the financial control approach was followed whereby all operations under the financial control of AECI were included in the carbon footprint boundary and 100% of emissions from their operations were accounted for.

The organisational boundaries for the footprint were determined as follows:

all significant AEL operations, together with the footprint associated with rock-on-ground contracts. AEL’s international operations were also included. Although South African emissions factors relating to electricity generation were used throughout, there was no material impact on the resultant figures; the impact of process emissions from nitric acid production at Modderfontein was calculated from measured values using a factor of 310 for global warming potential for nitrous oxide (“N2O”); emissions resulting from the burning of emulsion wastes have not been included due to reporting difficulties;

all specialty chemicals operations; South African emission factors were used for all calculations, as the impact on the reported emissions from Resitec’s Brazilian operations was not material;

all Heartland operations, which are all in South Africa; and

the operations of STF in the USA in which case the emissions factor for Duke Power Utility (STF’s electricity provider) was used due to its significant impact on the final result.

The total CO2 emission equivalent for the Group (both direct and indirect) decreased to 506 253 tonnes* (2011: 577 478 tonnes*). This decrease is primarily attributable to the reduction in Scope 1 emissions from all business segments of the Company. Part of the reduction in the specialty chemicals segment arose from the correction of emissions from one of Resitec’s facilities, which was accounted for twice in 2011.

The overwhelming majority of Scope 2 emissions reported above arose from electricity consumption. AECI used 215 401 MWh* of electricity in 2012 (2011: 211 048 MWh) and the usage by business segment can be seen in the graph to the left. AECI’s total energy usage during 2012 was 2 659 107 GJ*.

Emissions other than CO2 can have a significant impact in terms of their global warming potential. Ammonium nitrate is used extensively in the explosives and fertilizer industries and is manufactured from nitric acid and ammonia. AEL has two nitric acid plants at Modderfontein. In these plants, nitrogen oxide gases are produced through the oxidation of ammonia on a platinum-rhodium metal catalyst gauze in the plants’ ammonia burners. These gases are oxidised to form nitrogen dioxide, which in the final reaction is absorbed in water to form nitric acid.

Some of the ammonia is converted to N2O in a side reaction which is usually released into the atmosphere as it has neither economic value nor is it toxic at typical emissions levels. However, it is a GHG with a global warming potential which is approximately 310 times that of CO2.

To combat global warming, a number of countries have ratified the Kyoto Protocol, thereby committing to reduce their emissions of GHGs, or to engage in emissions trading to enable them to contribute towards the overall decrease in emissions of these gases. Provision was made in the Kyoto Protocol for the registration of Clean Development Mechanism (“CDM”) projects which allow participants in developing countries to generate Certified Emissions Reductions (“CERs”) by lowering their emissions of GHGs. CERs can then be sold to those entities that are under an obligation to reduce these gases but are unable to achieve the required reductions.

AEL has registered two CDM projects with the United Nations Framework Convention on Climate Change. These are for the No. 9 and No. 11 Nitric Acid plants and were registered in November 2007 and February 2008 respectively. The projects involved the installation of secondary catalysts in the ammonia burners of the plants. This secondary catalyst decomposes the residual N2O without affecting the production of nitric acid.

During 2012 the emissions reduction achieved on the No. 9 plant averaged 90%, with No. 11 achieving 80%. Total abatement from the No. 9 plant during 2012 was 76 763 tonnes of CO2 equivalent (2011: 84 467 tonnes). Total abatement from the No. 11 plant was 255 685 tonnes of CO2 equivalent (2011: 212 421 tonnes).

The outlook for CERs remains less than positive, with values expected to be depressed due partly to current global economic conditions having led to their over-supply. In addition, the original Kyoto Protocol has now expired and it remains unclear to what extent and in what form the CDM process will continue.

CASE STUDY – THE MODDERFONTEIN RESERVE: DEMONSTRATING SUSTAINABLE DEVELOPMENT

The Modderfontein Reserve was officially opened to the public in September 2012. It is Gauteng’s biggest private open space and, in addition to protecting the indigenous flora and fauna in the area, the Reserve is an attractive open space within the urban fabric. It is available to visitors, on a controlled access basis.

The Reserve is part of AECI’s 2 400 hectare Modderfontein landholding, which is managed by Heartland. It has always been AECI’s intention to formalise the open land occupied by the Reserve and Heartland was assigned this task. Heartland, under the guidance of the Endangered Wildlife Trust (“EWT”) and with the assistance of the Modderfontein Conservation Society (“MCS”), formalised the 275 hectare reserve by way of rezoning it to private open space. Such zoning was chosen as the best option for a number of reasons: it cannot be changed without adherence to rigorous administrative processes, including public participation, and it safeguards the area against encroachment by future urban development. Furthermore, since maintenance and conservation require substantial financial investment, proper management and access control prevent abuse of the facility and help to ensure that the space is safe for recreation and educational initiatives. The Reserve is fenced off and is patrolled by security guards 24 hours a day.

The EWT has entered into a collaborative agreement with Heartland to oversee the daily operation of the Reserve and to implement its strategy for the future. This includes the preparation and execution of a business plan to safeguard the Reserve’s financial security going forward. The vision is for the Reserve to become a self-sustaining entity over time. In the interim AECI is carrying the financial obligations for limited capital expenditure and operating expenses.

The MCS is playing a vital role, having had an interest in the area for many years. The Society, which celebrated its 21st anniversary in 2012, was involved in the initial commissioning of studies to determine the best possible options for the land and organised various activities in the now formalised Reserve. A number of MCS members are assisting the EWT with conservation initiatives in the Reserve.

Fauna and flora studies are being conducted to record animal and plant species in the Reserve and a monitoring system is being implemented to allow the EWT team to record changes at fixed points throughout the area over time. Mammals on the site include small buck such as steenbok, as well as Black-backed jackals. A bat survey has been completed and monitoring studies are on-going. Fish Eagles and Long-crested Eagles are among the bird life there.

Heartland is mentoring two start-up companies as service providers across a range of activities, including maintenance and the provision of indigenous plants which are replacing the alien vegetation that is being removed systematically.

Part of the vision is that education programmes will form an important part of the activities at the Reserve. These are expected to include schools and other interest groups and university students will be offered the opportunity to use the Reserve for research and field work.

Admission fees are R30 per adult and R15 for children and pensioners. An annual fee option is available for those wanting regular access. Walking and cycling trails are in the process of being marked. Interested parties can view regular updates on the Modderfontein Reserve website www.modderfonteinreserve.co.za

The Modderfontein Conservation Society’s web address is www.modderconserve.org

AECI and Heartland believe that a good foundation has been laid and that future work will continue to benefit the ecosystem while at the same time providing the public with safe access to a unique facility.

SAFETY AND HEALTH PERFORMANCE

Safety and health performance is expressed as the Total Recordable Incident Rate (“TRIR”). The TRIR measures the number of incidents per 200 000 hours worked. AECI reported statistics separately for employees and contractors until 2009. From 2010 the two statistics were combined to reflect the incident rate for all who work in whatever capacity at AECI’s facilities. For information, the figures are still shown separately in the table below, per business segment.

In 2012 AECI achieved its best ever safety and health performance with a year-end TRIR of 0,53* (2011: 0,67*). Even more importantly, the continually improving trend in incident rates which was interrupted in 2011 has been re-established.

The specialty chemicals cluster was the main contributor to the year-on-year improvement. In 2011 the cluster recorded a particularly high TRIR of 1,25 which reversed the improving trend of prior years. Targeted initiatives driven by Senior Managers resulted in a major turnaround which saw the cluster achieving a 35% reduction in the incident rate, and a TRIR of 0,80 at year-end.

The number of occupational illnesses in the Group decreased to four* in 2012 and the Group ended the year with an occupational illness rate of 0,04* (2011: 0,05*). These illness cases are included in the TRIR figures above. At AEL’s Mankwe operations, in the North West, a case of an employee having high levels of lead in his blood due to occupational exposure was reported. After being withdrawn from the workplace, the employee’s condition normalised and he resumed his duties. A case of noise-induced hearing loss was diagnosed at the same site. At AEL’s Modderfontein operations an employee was diagnosed with carpal tunnel syndrome, probably related to the repetitive tasks that he was carrying out as part of his work.

BENCHMARK TRIR

TRIR PERFORMANCE BY BUSINESS SEGMENT

      EMPLOYEES   CONTRACTORS   COMBINED  
  Explosives   0,31   0,64   0,37  
  Specialty chemicals   0,80   0,83   0,80  
  Property   0,49   0,19   0,28  
  Specialty fibres   1,25   0,00   1,25  
  AECI GROUP   0,51   0,60   0,53*  

An employee at IOP’s Jacobs site was diagnosed with an allergy-related skin irritation. In each case, a comprehensive investigation was carried out to determine what had led to the illness, and the necessary corrective actions were implemented to prevent a re-occurrence.

In 2012, a comprehensive review of AECI’s occupational health standards and protocols was undertaken to ensure that they continue to conform with local and international legal requirements and good practice, and to ensure that they remain applicable to AECI’s expanding operational footprint.

AECI benchmarks itself against an appropriate grouping of international companies with zero incidents remaining the ultimate target.

The benchmarked TRIR graph presented above has been compiled by an independent consultant from the latest publicly available information from the various companies’ websites at the time of writing. These companies were selected on the basis of their operations being similar to those of AECI’s businesses. Due to minor variations in reporting formats, the rate was recalculated in certain cases to provide results uniform with the USA’s Occupational Safety and Health Administration system of reporting, the basis for AECI’s own reporting.

The majority of these companies report their statistics for all workers and not only for employees, as AECI has done since 2010. However, unlike AECI some companies have not included occupational illnesses in their calculations. This may result in their TRIR statistics being marginally understated in the benchmark.

PROCESS SAFETY

Process Safety Management policy

The AECI Group’s focus on zero harm is entrenched in the Company’s SHE policy and standards. Process Safety Management (“PSM”) is an integral feature of that focus.

AECI is committed to the prevention of, preparedness for, mitigation of and response to releases of chemicals and energy from its manufacturing and storage facilities that may impact on its employees, contractors, customers and surrounding communities.

The AECI Executive Committee, guided by the Group SHE Department, is responsible for the regular review of the Group’s PSM policy, for the guidance of Group companies in its implementation, and for monitoring performance.

The PSM system is comprised of three broad dimensions: People, Plant and Systems, integrating 18 PSM elements.

Each Group company is required:

to adopt a PSM policy that meets the needs of its businesses;

to hold line management accountable for the implementation of the PSM policy;

to develop and maintain appropriate procedures to support the PSM policy;

to identify the Top 5 process safety risks;

to manage process safety risks in a manner that meets the legal requirements of the countries in which it operates as well as accepted international criteria;

to maintain a record of process safety information; and

to audit its performance against its policy, standards and procedures and to report this regularly to the AECI Executive Committee.

The PSM implementation strategy is based on this policy. Each of the 18 key elements have a good practice guideline that aligns businesses with AECI’s requirements in areas of process safety. Alignment is achieved through the roll-out of guidelines at each site, allowing a time frame for implementation which is followed by an internal audit and a period for resolving any shortcomings.

In 2012 attention was concentrated on the Contractor Management, Process Hazard Analysis, Management of Change and Permit to Work management systems. Incident Investigation, Emergency Preparedness, Process Safety Information and Data, and Operating and Maintenance Procedures will be the focus in the coming year.

PROCESS SAFETY MANAGEMENT

PROCESS SAFETY MANAGEMENT

WELLNESS AND HIV/AIDS

One of the challenges facing South Africa is an unusually high disease burden among its population. The welfare and well-being of employees, as fundamentally important stakeholders, is a priority for the AECI Group. All permanent employees domiciled in South Africa are encouraged to join the AECI Medical Aid Society (“Society”). This Society offers an option for comprehensive cover as well as a more affordable option, the latter being fully subsidised for lower income earners.

In line with the Group’s proactive and holistic approach to healthcare, a Wellness Steering Committee is in place. It is representative of management, employees and trade unions and has the responsibility of driving and monitoring wellness initiatives and related strategies across the Group. The aim is to move from an illness focus to one of general well-being, acknowledging that overall good health involves a multitude of facets, including lifestyle elements. Employee assistance programmes are in place and are accessible to the majority of the Group’s workforce. These programmes provide counselling on a variety of issues ranging from financial guidance to help with post-traumatic stress.

To implement the Group’s wellness programme, peer educators have been trained to become Champions of Wellness. These Champions are employees who volunteer to assist their colleagues in understanding, preventing and managing HIV/Aids and other chronic diseases. Advice on healthy lifestyles is another area of focus. Emphasis is also placed on helping needy people in the communities in which the Group operates.

Once fully trained as Champions of Wellness, volunteers can continue their training to become Champions of Life. At this advanced stage, trainees are taught to set objectives, deal with sensitive issues and sustain a meaningful quality of life (“lead by example”). In the next phases of the initiative, namely Champions of Change and Champion Buddies, volunteers learn how to act as agents to facilitate change in the way their colleagues and community members view HIV/Aids.

During 2012 a new course was introduced into the wellness programme, covering training on policies and procedures relating to the management of chronically ill employees. A conference and planning workshop was held for the Champions and it was most pleasing that two key unions representing AECI employees became constructively involved.

2011

UIC SHE Report 2011 [PDF - 2MB]
Stakeholders Forum - Air Focus [PDF - 1MB]

SHE MANAGEMENT

AECI’s management of SHE-related issues is guided by a formal SHE Policy, with performance being measured within a framework of supporting SHE Standards. The Policy and Standards, which are agreed to and approved by the Chief Executive, are reviewed periodically by the Social and Ethics Committee on behalf of the Board to ensure that they remain appropriate for AECI’s diverse businesses and the changing operating environment.

A significant development in AECI’s management approach during 2011 was the introduction of Green Gauge, a framework of Group-wide environmental objectives and targets.

In many cases it is appropriate for businesses and/or individual sites to align their SHE management systems with an external standard against which third-party audits can be undertaken. The most commonly adopted such systems in AECI are:

OHSAS 18001 (an international health and safety management standard);

ISO 14001 (an international environmental management standard); and

NOSA 5 Star (a South African SHE management system).

Most Group companies also participate in Responsible Care™, an international set of management practice standards which are verified externally in certain jurisdictions including South Africa.

AECI comprises a broad spectrum of businesses, ranging from large manufacturing plants producing explosives and chemicals, to small operations on customer sites which provide application services as well as property leasing and development activities. In addition, many of the Group’s operational sites are outside of South Africa, sometimes in relatively underdeveloped countries. Consequently, SHE-related issues faced by the 19 businesses in the portfolio are very diverse. It is inevitable therefore that a certain degree of generalisation occurs when commenting on such varied activities within a single Report.

RECOGNISING STAKEHOLDER NEEDS

There are external stakeholders with an interest in the AECI Group’s SHE-related matters. To address their respective needs, AECI is involved in a number of initiatives and associations in this important area. The most all-encompassing of these is the Responsible Care™ initiative. Other initiatives include:

longstanding membership of and involvement in SAFEX International, which aims to protect people and property against dangers and damage by sharing experience in the global explosives industry; a representative of AEL serves on the organisation’s Board of Governors;

the Chemical and Allied Industries’ Association (“CAIA”), of which AECI is a member, engages with both the South African government and various international agencies on a range of SHE-related matters. Some of the interactions with the authorities are carried out under the auspices of Business Unity South Africa of which CAIA is a member. CAIA’s engagements include the Department of Labour’s working group on occupational health and safety, climate change matters, and the National Waste Act. AECI is represented on the Board of CAIA;

a Process Safety Forum has been set up for the chemical industry in South Africa. AECI representatives are active members of this Forum;

the Chemicals Handling and Environmental Forum is tasked with promoting the responsible handling of chemicals throughout their lifecycle by providing a forum for stakeholders to discuss critical issues pertaining to the handling, storage, transport and distribution of hazardous chemicals. The Forum comprises representatives of CAIA member companies, government departments, other allied industry associations and various industry experts. AECI is represented at this Forum;

AECI’s Wellness Programme has been well received by the unions and there has been significant interaction with the national structures of the South African Chemical Workers’ Union (“SACWU”) and the Chemical, Energy, Paper, Printing, Wood and Allied Workers’ Union (“CEPPWAWU”) in this regard. More detail on the Wellness Programme is given later in this Sustainability Report; and

Community Liaison Forums, Community Awareness and Emergency Response Committees as well as Stakeholder Forums are in place at major sites in the AECI Group. These structures manage the interaction on SHE-related matters between local communities, interest groups and other Interested and Affected Parties (“IAPs”) and the Group.

Responsible Care™ is the global chemical industry’s voluntary initiative for the continual improvement of performance in safety, health and environmental practices. It is a public commitment to responsible management and stewardship of products and services through their lifecycle. It is also the vehicle used by the industry in its pursuit of improved product stewardship.

Responsible Care™ was launched by the Canadian Chemical Producers’ Association in 1984 and has since been adopted in 53 countries. CAIA is the custodian of Responsible Care™ in South Africa, with 147 South African businesses being signatories. The Responsible Care™ Standing Committee, currently chaired by an AECI Senior Manager, is responsible for guiding the programme.

AECI Limited is a signatory to Responsible Care™, as is AEL in South Africa. All 16 companies in the specialty chemicals cluster are also signatories in their own right. In South Africa signatories have their compliance with the Management Practice Standards verified by independent third party auditors. The majority of signatory companies in the Group have been audited successfully against these standards.

Shareholders are naturally important stakeholders for AECI. Two SHE-related initiatives with which AECI is involved that are of direct relevance to shareholders are the JSE SRI Index, and the CDP, a global initiative administered locally by the National Business Initiative.

The JSE established the SRI index in 2004. Initially only the Top 40 companies were assessed automatically. The automatic assessment of Mid-Caps, including AECI, followed. With the addition of some Small-Caps, a total of 109 potential Index constituents were measured in 2011. The evaluation process includes four areas being Environment, Society, Governance and (from 2010) Climate Change.

Seventy four of the 109 companies, or 68%, were included in the Index. While 90% of the Top 40 qualified, the success rate for Mid-Caps was only 52%. AECI was included for the third successive year.

The CDP is an international voluntary disclosure programme. Data on GHG emissions and climate change response actions by business are collated on behalf of global investors with assets of US$71 trillion.

In South Africa the JSE Top 100 companies were invited to submit data in 2011. AECI participated for the third consecutive year and achieved a disclosure score of 83%, a significant improvement on 2010’s performance when a score of 36% was obtained.

LAND REMEDIATION

The guiding principles underlying AECI’s remediation activities are to protect human health and the environment; to use good science, proven concepts and the best available technologies without entailing excessive cost; and to work with regulatory authorities as well as sharing information with IAPS.

Human health and environmental risk assessments are undertaken at appropriate stages of individual projects. These assessments influence subsequent activities.

Spending on remediation and related environmental management activities in 2011 amounted to R14 million, compared to R9 million in 2010. At 31 December 2011 the environmental liability for the Group was estimated at R171 million for remediation and was fully provided for.

ENVIRONMENTAL PERFORMANCE

The sustainability key performance indicators that follow have been measured and reported using AECI’s internal Standards and guidelines which are available on request.

WATER USAGE

As stated in last year’s Annual Report, there was a substantial increase in the Group’s water usage in 2010. The main reason for this was the inclusion, for the first time, of environmental performance figures for AEL’s operations outside of Modderfontein. It is pleasing to report that the Group’s water consumption for 2011 was 3% lower at
4 748 000 m3* (2010: 4 870 000 m3*). This reduction was due to a range of efficiency improvements in AEL and the specialty chemicals cluster. Heartland and STF recorded small increases in water consumption related to increased production rates.

HAZARDOUS WASTE

The reported quantity of hazardous waste generated by the Group’s operations rose by 19% year-on-year, from 4 971 tonnes* to 5 920 tonnes*. The specialty chemicals cluster reduced its hazardous waste arisings by 21% in 2011. However, AEL’s reported hazardous waste rose from 1 910 tonnes in 2010 to 3 475 tonnes. This significant increase is attributable to two main factors: while the environmental performance figures from AEL’s operations outside of Modderfontein were included for the first time in 2010, during 2011 it was determined that not all waste streams at certain remote operations had been included. In addition, increased production at AEL’s Indonesian operations led to an increase in waste arising.

ENVIRONMENTAL INCIDENTS

There were six* significant environmental incidents in the year (2010: 10* significant incidents). No major incidents (as defined in AECI’s reporting Standards which are available on request) occurred:

during a heavy downpour, contaminated stormwater from Resinkem’s operations at Umbogintwini was inadvertently released into the Umbogintwini Industrial Complex’s stormwater system;

a third party contractor was moving Crest’s products from Durban to Cape Town. The driver suffered a heart attack and lost control of the vehicle, which ploughed into the Orange River;

at AEL, Modderfontein, approximately 10 tonnes of nitric acid overflowed from a tank during pumping operations. Some of this acid ran into the effluent system where it was neutralised;

also at AEL’s Modderfontein operations, approximately 1,5 tonnes of nitric acid was spilled due to an operator error. This acid flowed into the effluent system where most of it was contained and neutralised;

a truck belonging to a third party contractor moving product for AEL was involved in a collision near Rustenburg in conditions of poor visibility. Approximately one tonne of product was spilled; and

a tanker belonging to a third party contractor moving product for AEL in Botswana swerved to miss a cow and overturned, leading to the spillage of six tonnes of product.

In all cases clean-up was carried out successfully with no significant permanent environmental damage.

ENVIRONMENTAL COMPLIANCE

The Group’s Modderfontein site has operated under the requirements of a draft Water Use Licence issued in 2006. Negotiations had been underway with the DWA to have this draft Licence replaced by a new Licence. The DWA issued a new Licence during 2011. However, it contained stringent conditions, effective immediately, which posed compliance constraints for the Group.

Prior to the Licence being issued, the Group had already commenced a programme of projects aimed at reducing effluent arising from operations at the site. Good progress is being made in this regard. Certain projects have been completed and their impact is already being felt. However, others involve the design and purchase of equipment with long lead times.

The approach being followed to achieve full compliance therefore is as follows:

proceed with all appropriate effluent reduction projects;

negotiate with the DWA to agree on a phased application of the tightened emission limits to match the rate at which the projects can be delivered; and

negotiate with the DWA to ensure that the limits take into account contaminants that are originating upstream of the site and not from the Group’s operations.

CARBON FOOTPRINT

The term “carbon footprint” is used to describe the total quantity of carbon dioxide (“CO2”) and other GHG emissions for which an organisation is responsible.

AECI’s carbon footprint has been calculated using the 2006 Intergovernmental Panel on Climate Change Guidelines for National Greenhouse Gas Inventories and the Greenhouse Gas Protocol’s Corporate Accounting and Reporting Standards, as developed by the World Resources Institute and the World Business Council for Sustainable Development.

In terms of the operating boundaries of the carbon footprint the following were included:

Scope 1 direct emissions – emissions from the consumption of fuel in mobile equipment; emissions from the consumption of fuel in stationary equipment; emissions released from processes occurring at operations; refrigerant usage in air conditioners and refrigeration equipment.

Scope 2 indirect emissions – indirect emissions which arise from the generation of purchased electricity and purchased steam consumed by the Group.

In terms of organisational boundaries, the financial control approach was followed. In this approach all operations under the financial control of AECI were included in the carbon footprint boundary and 100% of emissions from their operations were accounted for.

In prior years the Eskom sold factor was used to calculate the CO2 emission factor of electricity consumed. In the current year the Eskom generated factor was applied. This change is attributed to more progressive reporting and better understanding of the GHG Protocol.

  SCOPE 1   SCOPE 2  
  TONNES OF CO2 EQUIVALENT   TONNES OF CO2 EQUIVALENT  
  2009   2010*   2011*   2009   2010*   2011*  
Explosives 216 000   219 310   201 499   71 000   77 768   76 622  
Specialty chemicals 15 500   24 665   59 801   80 700   103 446   135 297  
Property 67 000   65 941   68 075   6 300   10 050   8 315  
Specialty fibres 500   976   534   19 400   25 041   27 335  
AECI GROUP 299 000   310 892   329 909   177 400   216 305   247 569  

The organisational boundaries for the footprint were determined as follows:

all significant AEL operations, together with the footprint associated with rock-on-ground contracts. AEL’s international operations were also included. Although South African emissions factors relating to electricity generation were used throughout, there was no material impact on the resultant figures; the impact of process emissions from nitric acid production at Modderfontein was calculated from measured values using a factor of 310 for global warming potential for nitrous oxide
(“N2O”); emissions resulting from the burning of emulsion wastes have not been included due to reporting difficulties;

all specialty chemical operations; uniform emission factors were used as the impact on the reported emissions from Resitec’s Brazilian operations was not material;

all specialty chemical operations; uniform emission factors were used as the impact on the reported emissions from Resitec’s Brazilian operations was not material;

all Heartland operations, which are all in South Africa; and

the operations of STF in the USA. In this case the emissions factor for Duke Power Utility was used due to there being a significant impact on the final result.

The total CO2 emission equivalent for the Group increased to 577 478 tonnes* (2010: 527 197 tonnes*). The increase in direct (Scope 1) CO2 emissions results from process emissions at Resitec’s manufacturing facilities in Brazil. A small increase in indirect (Scope 2) emissions occurred at STF as a result of higher electricity consumption due to increased production. A larger increase occurred in the specialty chemicals cluster. This related to increased steam consumption as the new manufacturing plants at Senmin’s site ramped up their production.

Emissions other than CO2 can have a significant impact in terms of their global warming potential. Ammonium nitrate is used extensively in the explosives and fertilizer industries and is manufactured from nitric acid and ammonia. AEL has two nitric acid plants at Modderfontein. In these plants, nitrogen oxide gases are produced through the oxidation of ammonia on a platinum-rhodium metal catalyst gauze in the plants’ ammonia burners. These gases are oxidised to form nitrogen dioxide, which in the final reaction is absorbed in water to form nitric acid.

Some of the ammonia is converted to N2O in a side reaction which is usually released into the atmosphere as it has neither economic value nor is it toxic at typical emission levels. However, it is a GHG with a global warming potential approximately 310 times that of CO2.

To combat global warming, a number of countries have ratified the Kyoto Protocol, thereby committing to reducing their emissions of GHGs, or to engage in emissions trading if they are to maintain or increase emissions of these gases. Provision was made in the Kyoto Protocol for the registration of Clean Development Mechanism (“CDM”) projects which allow participants in developing countries to generate Certified Emissions Reductions (“CERs”) by lowering their emissions of GHGs. CERs can then be sold to those entities that are under an obligation to reduce these gases but are unable to achieve the required reductions.

AEL has registered two CDM projects with the United Nations Framework Convention on Climate Change. These are for the No. 9 and No. 11 nitric acid plants and were registered in November 2007 and February 2008 respectively. The projects involve the installation of secondary catalysts in the ammonia burners of the plants. This secondary catalyst decomposes the residual N2O without affecting the production of nitric acid.

During 2011 the emission reduction achieved on the No. 9 plant averaged 92%, with No. 11 achieving 85%. The No. 9 plant catalyst performed well throughout the year in spite of a number of stoppages. The starting and stopping of the plants has a negative effect not only on the plant performance but also on the performance of the secondary catalyst.

Total abatement from the No. 9 plant was 84 467 tonnes CO2 equivalent (2010: 33 922 tonnes) in the first full year of operation with a new type of secondary catalyst.

A number of operational problems led to reduced performance of the No. 11 nitric acid plant’s secondary catalyst. However, emissions abatement for 2011 still exceeded 2010’s figure of 171 759 tonnes, with 212 421 tonnes CO2 equivalent being achieved.

SAFETY AND HEALTH PERFORMANCE

Safety and health performance is expressed as the Total Recordable Incident Rate (“TRIR”). The TRIR measures the number of incidents per 200 000 hours worked. In the past, AECI reported statistics separately for employees and contractors. From 2010 however, the two statistics were combined to reflect the incident rate for all who work in whatever capacity at AECI’s facilities. For information, the separate figures are still shown in the table below, per business segment.

In 2010 AECI achieved its lowest ever level of worker injuries and illnesses (0,60 *). It was disappointing that this level of performance was not maintained in 2011 and the TRIR rose to 0,67*.

Tragically, a fatality occurred in August 2011 subsequent to a plant fire while operators were loading a vessel at the Resitec joint venture’s site in Rio de Janeiro, Brazil.

TRIR PERFORMANCE BY BUSINESS SEGMENT            
  Employees   Contractors   Combined  
Explosives 0,31   0,68   0,38  
Specialty chemicals 1,27   1,18   1,25  
Property 0,47   0,20   0,28  
Specialty fibres 1,15   0,00   1,15  
AECI GROUP 0,65   0,74   0,67*  

AEL and Heartland had particularly pleasing reductions in their incident rates with both achieving their best ever performance in this area. The incident rate at STF is still higher than desirable. However, having halved the rate from 2009 to 2010, the business achieved a further reduction of 41% and there is every indication that this downward trend will continue. The main area of concern is the specialty chemicals cluster, where incident rates rose by 67% year-on-year. Significant efforts are being made by the relevant business leaders to reverse this unacceptable trend.

The Occupational Illness Rate in 2011 was 0,05* (2010: 0,03*). Five occupational illnesses were reported in the year under review. Three of these were forms of asthma related to operations in the specialty chemicals businesses. The remaining two occurred in AEL, where two employees had to be temporarily removed from their workplace due to exposure to lead.

AECI benchmarks itself against an appropriate grouping of international companies with zero incidents being the ultimate target. The benchmarked TRIR graph presented here has been compiled by an independent consultant from the latest information publicly available from the various companies’ websites at the time of writing. These companies were selected on the basis of their operations being similar to those of AECI’s businesses. Due to minor variations in reporting formats, the rate was recalculated in certain cases to provide results uniform with the USA’s Occupational Safety and Health Administration system of reporting, the basis for AECI’s own reporting.

BENCHMARKED TRIR

BENCHMARKED TRIR

The majority of these companies report their statistics for all workers and not only employees, as AECI has done since 2010. However, unlike AECI, some companies have not included occupational illnesses in their figures. This may result in their TRIR statistics being marginally understated in this benchmark.

2010

SHE MANAGEMENT

AECI’s management of SHE-related issues is guided by a formal SHE Policy, with performance being measured in the context of supporting SHE Standards. The Policy and Standards, which are agreed to and approved by the Group Chief Executive, are reviewed periodically, and most recently in 2008, by the Corporate Citizenship Committee on behalf of the Board to ensure that they remain appropriate to AECI’s diverse businesses and the changing operating environment.

At the beginning of each year, the Managing Directors of AECI’s businesses are required to submit a Letter of Assurance with respect to SHE-related issues to the Group Chief Executive. This, inter alia, provides confirmation that the particular business complies in all material respects with AECI’s SHE Standards. In the event that such confirmation cannot be given, the Letter details the nature of the non-compliance, as well as the intended corrective action.

AECI comprises a broad spectrum of businesses, ranging from large manufacturing plants producing chemicals and explosives, to small operations on customer sites which provide application services, as well as property leasing and development activities. In addition, many of the Group’s operational sites are situated outside of South Africa, sometimes in relatively undeveloped countries. Consequently, SHE-related issues faced by the 21 businesses in the portfolio are very diverse. It is inevitable, therefore, that a certain degree of generalisation occurs when commenting on such varied activities within a single report.

RESPONSIBLE CARE™

Responsible Care™ is the global chemical industry’s voluntary initiative for continuous improvement of performance in safety, health and environmental practices. It is a public commitment to responsible management and stewardship of products and services through their lifecycle.

It is also the vehicle used by the industry in its pursuit of improved SHE performance and product stewardship.

Responsible Care™ was launched by the Canadian Chemical Producers’ Association in 1984 and has since been adopted in 60 countries. The Chemical and Allied Industries’ Association is the custodian of Responsible Care™ in South Africa, and 142 South African businesses are signatories. The Responsible Care™ Standing Committee, currently chaired by a Senior AECI Manager, is responsible for guiding the programme. In line with the guidelines of the International Council of Chemical Associations, the South African programme is based on eight fundamentals:

1. a formal commitment by each member company to a set of guiding principles;

2. a series of codes, guidance notes and checklists to help companies fulfill their commitment;

3. the development of indicators against which improvements in performance can be measured;

4. open communication on SHE matters with interested parties, both inside and outside the industry;

5. opportunities for companies to share views and exchange experiences on implementing Responsible Care™;

6. consideration of how best to encourage all member companies to commit themselves to, and participate in, Responsible Care™;

7. a title and logo which clearly identify national programmes as being consistent with, and part of, the Responsible Care™ concept; and

8. procedures for verifying that member companies have implemented the measurable or practical elements of Responsible Care™.

AECI and its chemicals and explosives businesses are signatories to Responsible Care™. In South Africa, signatories have their compliance with the Management Practice Standards verified by third-party auditors. The majority of signatory companies in the AECI Group have been audited successfully against these Standards.

In the broader area of corporate responsibility, AECI was again included in the JSE Limited’s Socially Responsible Investment Index in 2010. This index was introduced by the JSE Limited a number of years ago to measure the triple-bottom line performance (environment, society and economy) and the governance performance of listed companies. Companies are assessed in terms of policy, performance and reporting. The criteria are updated each year and now include the consideration of factors such as climate change.

LAND REMEDIATION

The guiding principles underlying AECI’s remediation activities are to protect human health and the environment; to use good science, proven concepts, and best available technologies not entailing excessive cost; and to work with regulatory authorities and share information with interested and affected parties.

A risk-based approach guides the remediation process. In addition, human health and environmental risk assessments are undertaken at appropriate stages of individual projects. These assessments influence subsequent activities.

Spending on remediation and related environmental management activities in 2010 amounted to R9 million, compared to R13 million in 2009. As noted in the previous reporting period, this expenditure is relatively low compared to that incurred a number of years ago. Most of AECI’s environmental legacy remediation investment is now complete. Furthermore, market conditions in 2010 were such that little land was required to be released for sale.

Therefore, remediation requirements were restricted since the timing of such activities is closely aligned to that of the sale of parcels of land. It is unlikely that remediation expenditure will increase significantly in 2011.

At 31 December 2010, the environmental liability for the Group was estimated at R164 million for remediation and was fully provided for.

ENVIRONMENTAL PERFORMANCE

This section deals with current operations and excludes waste arisings from land remediation activities. Data from AEL Mining Services (AEL) operations outside of Modderfontein are included for the first time.

WATER USAGE

Total water usage for the year was 4,87 million litres.1

The vast majority of the 43% increase in the Group’s reported water consumption is due to the inclusion of AEL’s operations outside of Modderfontein. With the significant expansions in Indonesia, these international operations now account for 39% of the water consumed by the mining services business. AEL’s Modderfontein operations also increased their water consumption as a direct result of increased production.

The specialty chemicals cluster’s use of water increased by 8% year-on-year, largely as a result of increased production. A similar situation prevailed at Heartland’s Umbogintwini operations, where water consumption was 15% higher. Increased production at STF’s upgraded manufacturing facilities also resulted in marginal increases in water consumption.

HAZARDOUS WASTE

Total hazardous waste arisings for the year were 4 971 tonnes.1

Businesses in the specialty chemicals cluster reduced their generation of hazardous waste by 24%. This was more than offset by the increase in waste generation reported by AEL. Part of this increase was due to the need to dispose of 592 tonnes of waste sulphuric acid during the year. This acid had previously been supplied to battery manufacturers. In 2010, however, there was insufficient market demand to absorb the full volume. The larger portion of the increase (1 496 tonnes) was attributable to arisings from AEL’s operations outside of Modderfontein –sites not reported on in previous years. Hazardous waste arisings from Heartland were minimal.

TARGETS

Environmental improvement targets for all AECI businesses are being developed and it is anticipated that these will become applicable by mid-2011.

ENVIRONMENTAL INCIDENTS

There were 10 environmental incidents in the year as follows: 1

Clean-up of a sulphuric acid spillage from a road tanker dispatched from Chemical Initiatives in KwaZulu-Natal required the temporary closure of the N2 freeway;

500 litres of tall oil leaked from a tank at Resitec’s site in Lages, Brazil;

About 5 tonnes of emulsion from AEL were spilled on the side of a road near East London when a Mobile Manufacturing Unit overturned;

About 10 tonnes of emulsion were spilled near Bogoso, Ghana, when a vehicle overturned;

A vehicle transporting products for Plaaskem was involved in an accident on the Hexrivierpoort Pass, Western Cape, resulting in a chemical spill;

About 5 tonnes of assorted chemicals were spilled on and next to the N3 highway when a contractor’s vehicle transporting products for ImproChem was hit by another vehicle;

34 tonnes of bagged ammonium nitrate fell from a contractor’s truck near Kapirimposhi, Zambia, following a head-on collision with another truck carrying lime;

24 tonnes of emulsion were spilled near Chililabombwe, Zambia, when a contractor’s truck overturned;

About 5 tonnes of ammonium nitrate were spilled near Chingola, Zambia, when a contractor’s truck was hit by another vehicle;

16 tonnes of emulsion were spilled near Solwezi, Zambia, when a contractor’s tanker overturned.

In all cases, clean-up was carried out successfully, with no significant permanent environmental impact.

CLIMATE CHANGE ISSUES

There is an overwhelming preponderance of scientific evidence showing the effect that increased concentrations of greenhouse gases are having on the earth’s climate. As a result, it has become increasingly important for companies to measure and report on their emissions of these gases. The Carbon Disclosure Project is an international organisation that works with stakeholders and organisations to encourage the measurement and disclosure of greenhouse gas emissions. The Project is being promoted in South Africa by the National Business Initiative, and AECI again took part in this initiative in 2010.

The term “carbon footprint” is commonly used to describe the total quantity of carbon dioxide (CO2) and other greenhouse gas emissions for which an organisation is responsible. AECI’s carbon footprint has been calculated with the assistance of external consultants, ERM South Africa, using the 2006 Intergovernmental Panel on Climate Change Guidelines for National Greenhouse Gas Inventories and the Greenhouse Gas Protocol’s Corporate Accounting and Reporting Standards, as developed by the World Resources Institute and the World Business Council for Sustainable Development.

In terms of the organisational boundaries of the study, the financial control approach was followed. In terms of this approach, all operations under the financial control of AECI were included within the carbon footprint boundary, and 100% of emissions from these operations were included.

In terms of the operating boundaries of the carbon footprint, the following were included:

  • Scope 1 direct emissions – emissions from the consumption of fuel in mobile equipment; emissions from the consumption of fuel in stationary equipment; emissions released from processes occurring at operations; refrigerant usage in air-conditioners and refrigeration equipment.
  • Scope 2 indirect emissions – indirect emissions which arise from the generation of purchased electricity and purchased steam consumed by the Group.

The organisational boundaries for which the footprint was determined were as follows:

  • all significant AEL operations, including those outside of South Africa, together with the footprint associated with rock-on-floor contracts;
  • all specialty chemical cluster operations, including those outside of South Africa;
  • all Heartland operations;
  • the operations of SANS Technical Fibers, USA.
CARBON FOOTPRINT FOR 20101
  Tonnes Scope 1 Scope 2 Total  
  Mining services 219 310 77 768 297 078  
  Specialty chemicals 24 665 103 446 128 111  
  Property 65 941 10 050 75 991  
  Specialty fibres 976 25 041 26 017  
  AECI GROUP 310 892 216 305 527 197  

The carbon footprint calculated for 2009 is presented for comparative purposes. There is an increase in the quantities reported in 2010, for the following reasons:

  • in 2009, only AEL’s operations at Modderfontein were included, whereas in 2010 operations elsewhere in Africa and in Indonesia were added;
  • the changes in the figures reported by the other businesses are largely as a result of an improvement in the quality of reporting, and the inclusion of information related to individually small sources of carbon emissions.
CARBON FOOTPRINT FOR 2009
  Tonnes Scope 1 Scope 2 Total  
  Mining services 216 000 71 000 287 000  
  Specialty chemicals 15 500 80 700 96 200  
  Property 67 000 6 300 73 300  
  Specialty fibres 500 19 400 19 900  
  AECI GROUP 299 000 177 400 476 400  

Emissions other than CO2 can also have a significant impact in terms of global warming potential. Ammonium nitrate is used extensively in the explosives and fertilizer industries and is manufactured from nitric acid and ammonia. AEL has two nitric acid plants at Modderfontein. Nitrogen oxide gases are produced through the oxidation of ammonia on a platinum-rhodium metal catalyst gauze in the ammonia burners of AEL’s nitric acid plants.

The ammonia is first oxidised to nitric oxide and then to nitrogen dioxide, which in the final reaction is absorbed in water to form nitric acid. Some of the ammonia is converted to nitrous oxide in a side reaction, which is usually released into the atmosphere as it does not have any economic value or toxicity at typical emission levels.

However, it is a greenhouse gas with a global warming potential approximately 310 times per unit mass as that of CO2.

To combat global warming, a number of countries have ratified the Kyoto Protocol, thereby committing to reducing their emissions of greenhouse gases, or to engage in emissions trading if they are to maintain or increase emissions of these gases.

Provision was made in the Kyoto Protocol for the registration of Clean Development Mechanism (CDM) projects, which allow participants in developing countries to generate Certified Emissions Reductions (CERs) by lowering their emissions of greenhouse gases. CERs can then be sold to those entities that are under an obligation to reduce greenhouse gases but are unable to achieve the required reductions.

AEL has registered two CDM projects with the United Nations Framework Convention on Climate Change. These are for the No. 9 and No. 11 nitric acid plants, and they were registered in November 2007 and February 2008 respectively. The projects involve the installation of secondary catalysts in the ammonia burners of the plants, below the primary gauze catalyst. This secondary catalyst decomposes the residual nitrous oxide without affecting the production of nitric acid.

During 2010, the Heraeus secondary catalyst on No. 9 nitric acid plant achieved an average reduction of 59%. The total reduction for the campaign period was the equivalent of 33 922 tonnes of CO2. Owing to cost considerations, performance issues and the good performance of the Johnson Matthey secondary catalyst on No. 11 nitric acid plant, a decision was taken to convert No. 9 to the same catalyst from September. The plant experienced a mechanical breakdown at the end of October and this precluded the proper testing of the newly-installed catalyst. However, all initial indications are that this catalyst performs better.

No. 11 completed its second campaign, with the Johnson Matthey secondary catalyst achieving a reduction of 89%. This translates into a reduction of 171 759 tonnes of CO2 equivalent.

SAFETY AND HEALTH PERFORMANCE

ALL WORKERS TRIR

ALL WORKERS TRIR

Safety and health performance is expressed as the Total Recordable Incident Rate (TRIR). Prior to 2010, AECI reported statistics separately for employees and contractors. From this year, the two statistics are combined to reflect the incident rate for all who work at AECI’s facilities. For information, the separate figures are still shown in the table on page 114, per business segment.

It is gratifying to report that in 2010 AECI achieved its lowest ever level of worker injuries and illnesses. The rate of 0,60 1 represents a 23% reduction from the level recorded in the prior reporting period.

AECI benchmarks itself against an appropriate grouping of international companies, with zero incidents being the ultimate target. Given the need for continual improvement, AECI’s Executive Committee has adjusted the maximum tolerable level for the TRIR for 2011 to 0,90 from 0,95 in 2010.

BENCHMARKED TRIR

The benchmarked TRIR graph presented here has been compiled by an independent consultant, Rob Ferrie, from the latest information publicly available from the various companies’ websites at the time of writing. These companies were selected on the basis of their operations being similar to those of AECI’s businesses. Due to minor variations in reporting formats, the rate was recalculated in certain cases to provide results uniform with the USA’s Occupational Safety and Health Administration system of reporting, which is the basis for AECI’s own reporting.

The majority of these companies report their statistics on the basis of all workers, as AECI has done for 2010. However, unlike AECI, some companies have not included occupational illnesses in their figures.

TRIR performance by business segment

TRIR PERFORMANCE 1
    Employees Contractors Combined  
  Mining services 0,44 0,54 0,46  
  Specialty chemicals 0,71 0,96 0,75  
  Property 0,00 0,89 0,63  
  Specialty fibres 1,96 0,00 1,96  
  AECI GROUP 0,55 0,80 0,60  

The mining services and specialty chemicals businesses showed exceptionally pleasing reductions in their incident rates. The property business recorded an increase in incidents, largely relating to a substantial demolition project under way in the Western Cape. The injury rate for the fibres business, while still unacceptably high, was half that for 2009 and none of the injuries that occurred were serious.

No fatalities occurred in the Group’s operations in 2010.

OCCUPATIONAL ILLNESS RATE

The occupational illness rate for 2010 was 0,03. 1

Three occupational illnesses were reported in 2010. An employee at AEL’s Modderfontein site was diagnosed with silicosis and another was removed temporarily from the workplace due to elevated blood lead levels. A third AEL employee, working on a mine, was diagnosed with contact dermatitis. The underlying causes of all three illnesses were rigorously investigated and action plans were put in place to prevent similar illnesses in the future.

2009

Health and safety performance

TRIR - AECI EMPLOYESS

Safety and occupational health performance is expressed as the Total Recordable Incident Rate (TRIR).

It is gratifying to report that in 2009 AECI achieved its lowest level of employee injuries and illnesses in recent years. The rate of 0,78 is a 7% reduction from the level recorded in the prior reporting period. Notably, almost across the whole Group, contractor incident rates are at significantly lower levels than in recent years.

Regrettably, a contractor fatality occurred during the year when demolition work was underway at Heartland's Potchefstroom site. The fatality was the result of a worker being struck on the back of the neck by a piece of steel plate.

AECI benchmarks itself against an appropriate grouping of international companies, with "zero incidents" being the ultimate target. Given the need for continual improvement, AECI's Executive Committee has adjusted the maximum tolerable level for TRIR for 2010 down to 0,95 from 1,00 in prior years.

The benchmarked TRIR graph presented below has been compiled by an independent consultant from the latest information available from the various companies' websites at the time of writing. These companies were selected on the basis of their operations being similar to those of AECI's businesses. Due to minor variations in reporting formats, the rate was recalculated in certain cases to provide results uniform with the USA's Occupational Safety and Health Administration system of reporting, which is the basis for AECI's own reporting.

Certain of the companies have modified their reporting criteria and some have restructured their business operations. It is not always possible, therefore, to compare rates meaningfully with those reported in previous years.

A noticeable trend is the increase in the number of companies which report incident rates for all workers (both employees and contractors). These include some of the better-performing companies. AECI will report on this basis from 2010.

TRIR PERFORMANCE BY AECI BUSINESS

    Employees   Contractors   Combined  
  AEL 0,58   0,85   0,61  
  Chemserve 0,96   0,85   0,92  
  Heartland 0,89   0,15   0,34  
  STF 5,10   0   5,10  
  AECI Group 0,78   0,61   0,73  

The employee TRIR for AEL Mining Services (AEL) has returned to 2007's levels of below 0,60, the company's maximum targeted limit, although incident rates for contractors remain slightly higher. Chemical Services (Chemserve) has continued its improving trend, with the employee rate falling from 1,0 to 0,96; the contractors' rate has fallen dramatically from the very high levels of 2008. Employee and contractor incident rates for Heartland are now well within acceptable limits, a significant improvement on the prior year. Incident rates at SANS Technical Fibers (STF), in the USA, are above acceptable limits. It should be noted, however, that the nature of the incidents was not serious, in the main. This notwithstanding, interventions planned for 2010 should result in an improvement.

Benchmarked TRIR

OCCUPATIONAL ILLNESSES

Occupational illness rate - AECI emplyees

The number of occupational illnesses reported in 2009 continued to decline. An employee at SANS Fibres, in Bellville, was diagnosed with asbestosis during his exit medical examination. A case of noise-induced hearing loss was reported at STF.

Other incidents of significance

a mobile manufacturing unit belonging to AEL overturned, resulting in the spillage of 3 tons of base emulsion and 300kg of ammonium nitrate prill;

1 000l of oil leaked from a pipe in AEL's nitrates complex at Modderfontein into a stormwater system, and then into a dam within Modderfontein;

nitric acid was spilled into the stormwater system while a tanker was being loaded at AEL's nitrates complex;

2,5 tons of ImproChem's chemical products were spilled on a national highway, leading to the temporary closure of the road, after a container on a truck split.

In all cases, clean-up was carried out successfully.

Environmental performance

This section deals with current operations and excludes waste arising from land remediation activities. AEL's operations outside of Modderfontein are not included. STF is included for the first time in this report. Furthermore, Group figures include the performance of SANS Fibres, Bellville, for the first three months of 2009 before manufacturing operations ceased. However, in the graphs showing performance by business, the Bellville figures are excluded as the plant is no longer in operation.

Water usage (million litres per year)

The Group's total water usage for 2009 decreased significantly, largely as a result of the closure of the Bellville plant. AEL's consumption fell by 16%, with most of this accounted for by lower production rates at the nitrates complex. STF's water usage accounted for less that 1% of the Group total.

Hazardous waste generated (thousand tons per year)

Hazardous waste arisings by business (%)

The volume of hazardous waste generated remained static year-on-year. With SANS Fibres at Bellville only having operated for the first quarter of the year, there was a commensurate reduction in waste generation from that site (excluding that resulting from demolition activities). However, AEL reported an increase in waste generation because emulsion waste arisings were included in the statistics for the first time. Chemserve, too, has seen a small increase in waste generation. STF's hazardous waste generation amounted to less than 1% of that generated by the Group.

Greenhouse gases

The need to report greenhouse gas emissions is becoming increasingly evident globally and South Africa is no exception. In the past, AECI has provided data related to certain aspects of this, including electricity consumption and carbon dioxide (CO2) emissions.

AECI took part in the Carbon Disclosure Project in 2009, which is being promoted in South Africa by the National Business Initiative.

During the reporting year, a decision was taken to develop a carbon footprint for the Group so as to provide a more meaningful summary of AECI's impact in this area. Due to the significance of nitrous oxide emissions at AEL's nitric acid plants they are included in the footprint calculation and, furthermore, are commented on separately.

The carbon footprint has been developed with the assistance of external consultants, making use of the 2006 International Panel on Climate Change Guidelines for National Greenhouse Gas Inventories and the Greenhouse Gas Protocol's Corporate Accounting and Reporting Standards, as developed by the World Resources Institute and the World Business Council for Sustainable Development.

The term carbon footprint is commonly used to describe the total amount of CO2 and other greenhouse gas emissions for which an organisation is responsible. The footprint developed for AECI currently includes Scope 1 emissions (direct emissions from, for example, the consumption of fuels in stationary equipment) and Scope 2 emissions (indirect emissions, which arise from the generation of the electricity consumed by the Group). Data for Scope 3 emissions (indirect emissions related to product delivery and employee business travel) are not available at present.

The organisational boundaries for which this footprint has been determined are as follows:

AEL's Modderfontein operations, together with the footprint associated with rock-on-floor contracts;

all Chemserve operations;

all Heartland operations;

STF's operations.

AECI's carbon footprint, measured in tons of CO2 equivalent, is shown in the table below:

    Scope 1   Scope 2   Total  
  AEL 216 000   71 000   287 000  
  Chemserve 15 500   80 700   96 200  
  Heartland 67 000   6 300   73 300  
  STF 500   19 400   19 900  
  AECI Group 299 000   177 400   476 400  

Emissions other than CO2 can also have a significant impact in terms of global warming potential.

Ammonium nitrate is used extensively in the explosives and fertilizer industries and is manufactured from nitric acid and ammonia. AEL has two nitric acid plants at Modderfontein, the No. 9 and No. 11 plants. Nitrogen oxide gases are produced through the oxidation of ammonia on a platinum-rhodium metal catalyst gauze in the ammonia burners of AEL's nitric acid plants.

Most of the gas generated is in the form of nitric oxide, which is absorbed by water to form nitric acid. Some of the gas produced is in the form of nitrous oxide, which is typically released into the atmosphere as it does not have any economic value or toxicity at typical emission levels. However, it is a greenhouse gas with a global warming potential approximately 300 times per unit mass that of CO2.

To combat global warming, a number of countries have ratified the Kyoto Protocol, thereby committing to reduce their emissions of greenhouse gases, or to engage in emissions trading were they to maintain or increase emissions of these gases.

Provision was made in the Kyoto Protocol for the registration of Clean Development Mechanism (CDM) projects, which allow participants in developing countries to generate Certified Emissions Reductions (CERs) by lowering their emissions of greenhouse gases. CERs can then be sold to those entities that are under an obligation to reduce greenhouse gases but are unable to achieve the required reductions.

AEL has registered two CDM projects with the United Nations Framework Convention on Climate Change. These are for the No. 9 and No. 11 nitric acid plants, and they were registered in November 2007 and February 2008 respectively. The projects involve the installation of secondary catalysts in the ammonia burners of the plants, below the primary gauze catalyst.

This secondary catalyst decomposes the residual nitrous oxide without affecting the production of nitric acid.

During 2009, the secondary catalyst on No. 9 nitric acid plant achieved a reduction of 50,3% in nitrous oxide emissions, with a total of 163 tons emitted; that on No. 11 plant achieved a 70% reduction, with a total of 270 tons emitted. When converted to CO2 equivalent, this amounts to 50 500 tons and 83 700 tons respectively

The lower efficiency achieved on the No. 9 plant is as a result of it being an older, high pressure plant. It is notoriously difficult to achieve high levels of emission abatement through the use of secondary catalysts in high pressure plants. The No. 11 plant would normally have achieved a higher level of efficiency, but a cracked catalyst basket led to significant bypassing for a six week period, before operational considerations allowed the taking off line of the plant.

To place these reductions in perspective, the reduction in CO2 equivalent emitted annually by AEL from these two plants is equivalent to the quantity of CO2 emitted by 60 000 medium-sized cars travelling an average of 25 000km per annum.

Land remediation

The guiding principles underlying AECI's remediation activities are to protect human health and the environment; to use good science, proven concepts, and best available techniques not entailing excessive cost; and to work with regulatory authorities and share information with interested and affected parties.

A risk-based approach guides the remediation process and human health and environmental risk assessments are undertaken at appropriate stages in individual projects. These assessments influence subsequent activities.

As explained in the operational review, the property business of AECI has been restructured. As a result, the execution of remediation activities is now managed by Heartland.

Spending on remediation and related environmental management activities in 2009 amounted to R13 million, significantly down on that of previous years. The reasons for this were two-fold. The bulk of AECI's environmental legacy remediation spend is now complete. Further, market conditions were such that little land was required to be released for sale, and thus remediation requirements were restricted since the timing of such activities is closely aligned to that of the sale of parcels of land. This low level of remediation spending is likely to continue in 2010.

At end-2009, the environmental liability for the Group was estimated at R144 million for remediation and was fully provided for.

Remediation case study

A remediation project at the Umbogintwini Industrial Complex (UIC) was initiated in 1995 to address the contamination of land and groundwater resources due to historical activities associated with the manufacture, storage and distribution of chemicals, agrochemicals and fertilizers.

In 2009, the project's progress was recognised in the biodiversity category of the annual eThekwini Mayor's Award for Excellence. The motivation for the award focused on best practice remediation, conservation and education work to address legacy issues. In particular, the Vumbuka Reserve, a 27 hectare area in the north-west portion of the UIC was highlighted. This area was previously used for the disposal of liquid and semi-solid wastes generated from manufacturing activities at the UIC from the mid-1950s until 1998.

The Vumbuka Reserve includes:

a series of effluent precipitation and settling dams;

two disused, partially-lined mercury sludge dams; and

the drums area, where drums originally containing chlorinated hydrocarbon wastes were buried.

STRATEGY

Remediation to address soil and groundwater impacts began in 1995 when the area was classified as a waste site to enable AECI to meet its legal and constitutional obligations to avoid nuisance and harm to others, to improve the environment and to comply with good governance requirements. In the process, a rehabilitation strategy for the Vumbuka Reserve evolved into the UIC's Environmental Management Plan.

The principles prioritised in formalising and implementing the strategy were:

the protection of human health and the environment is paramount;

commitment to the use of good science;

the efficacy of scientific solutions must be demonstrated;

AECI must balance its duty to shareholders with its duty to protect human health and the environment by utilising the best available techniques, not entailing excessive cost;

a risk-based approach, founded on comprehensive risk assessments, must be followed;

regular liaison with regulatory authorities must take place; and

information must be shared with interested and affected parties, and they must be encouraged to participate in the problem-solving process.

The strategy has six technical elements together with community participation, the over-arching management element.

PROCESS

To prevent groundwater contamination, boreholes were sunk to abstract water from sludge in and around the settling and precipitation dams and adjacent to the site boundary with the neighbouring community. The idea was to create a hydraulic barrier to control the migration of the groundwater plume off-site. Water is treated prior to safe disposal to sea via a marine outfall. Dewatering of the sludge also served to reduce the head of pressure that was driving groundwater beyond the boundaries of the dams and the UIC. Agricultural drains were installed to capture seepage around the dams and in the neighbouring residential area of Ezimbokodweni.

Leaching is managed with standard engineering interventions such as drains, conduits and pipes and, where appropriate, surface profiling has been undertaken to promote run-off of excess precipitation and to ensure the appropriate drainage of clean stormwater.

In the drums area, additional boundary wells were installed to intercept and abstract groundwater to control its off-site migration. All arisings are captured and transferred to the UIC's effluent treatment plant prior to safe disposal to sea.

Avoiding the recharge of the dewatered dams by the infiltration of rain was always recognised as being key to the clean-up of Vumbuka. In evaluating options for capping the dams, the project developed what is arguably its most distinctive intervention. As it became apparent that vegetation was re-establishing itself unaided in the area, extensive work was undertaken to determine whether this natural process could be sustained and enhanced to benefit long-term clean-up. This led to the eventual choice of a vegetative, evapo-transpiration (ET) cover as the preferred option for the Reserve's dam area. The drums area was capped with a conventional, engineered cover.

The ET cap provides long-term, natural sustainability for remediating the dams area of Vumbuka since the microbial action associated with vegetation and its growth reduces maintenance and provides contaminant source reduction as roots grow deeper into the waste body.

RESULTS

Investigations undertaken by independent consultants show that waste in the former effluent dams can sustain a variety of plant and animal life and that waste below the root zone is being biodegraded into less hazardous substances. Indigenous plant life is flourishing in what was considered to be an extremely unfavourable environment, and is controlling infiltration whilst simultaneously aiding general clean-up of chemical contamination.

The ET cover has been approved by the Department of Water Affairs, subject to its effectiveness being monitored as part of the project's Environmental Management Plan into the future.

To reduce contamination at source in the drums area, augmented natural attenuation was the preferred remedial option. A bio-barrier was created to contain and, eventually, reduce pollutants in the source zone to acceptable levels. To create the bio-barrier nutrients and additional micro-organisms were introduced into the subsurface via injection wells in 2008 and early in 2009. The aim was to augment natural processes at work. Initial results are tentative but encouraging, indicating a good probability that by augmenting natural processes already underway, the time spans to effect clean-up can be shortened appreciably. The success of the work will continue to be monitored closely and it is hoped that the results of analyses to be carried out in 2010 will confirm the positive trend noted.

Throughout the project, a policy of transparency has been applied. During the evolution and implementation of the rehabilitation strategy, risks associated with historical chemical-related activities at Umbogintwini and resultant levels of contamination have always been made known to relevant parties. Progress is reported annually at stakeholder forum meetings and groundwater monitoring will be an agenda item at the UIC's quarterly Licence Advisory Forum meetings.

CONSERVATION AND EDUCATION

The Vumbuka Reserve has been transformed from a series of waste disposal dams into a conservation area with over 10 000 indigenous flora and increasingly diverse wildlife. When combined with the other already well established conservation areas at the UIC, namely Umbogavango and Mamba Valley, 77 hectares or 30% of the UIC's developed land is now a green belt. Some fencing at Umbogavango has been removed, creating a link with Vumbuka and allowing the free movement of wildlife, including the Cape Clawless Otter, between the various green belt areas. Umbogavango is characterised by coastal forest, secondary grassland and a herbaceous wetland. Vervet monkeys abound and Banded and Water Mongoose, Blue Duiker, and Spotted Genet are also seen. Over 200 bird species have been identified.

An alien vegetation eradication programme that began at Umbogavango in 2005 is being expanded to cover extensive new areas. A portion of the recreation area has been upgraded, with a section being paved to allow easy wheelchair access. Adjacent areas have also been re-grassed.

Two disused explosives magazines are within Umbogavango. One is being used to provide owl houses and perches, the other to establish a bat roost.

Thanks to the sponsorship of a number of site companies, the Umbogavango Resource Centre is made available to the Wildlife and Environment Society of South Africa for its environmental outreach programme.

Umbogavango, Mamba Valley and Vumbuka are open to visitors by appointment.

Responsible Care*

Responsible Care* is the global chemical industry's voluntary initiative for continuous improvement of performance in safety, health and environmental practices. It is a public commitment to responsible management and stewardship of products and services throughout the lifecycle of products. It is also the vehicle used by the industry in its pursuit of improved performance in the areas of safety, health, the environment and product stewardship.

Responsible Care* was launched by the Canadian Chemical Producers' Association in 1984 and has now been adopted in 53 countries. The Chemical and Allied Industries' Association, chaired by an executive director of AECI, is the custodian of Responsible Care* in South Africa. The Responsible Care* Standing Committee, currently chaired by an AECI senior manager, is responsible for guiding the programme. In line with the guidelines of the International Council of Chemical Associations, the South African programme is based on eight fundamentals:

a formal commitment by each member company to a set of guiding principles;

a series of codes, guidance notes and checklists to help companies fulfil their commitment;

the development of indicators against which improvements in performance can be measured;

open communication on safety, health and environmental matters with interested parties, both inside and outside the industry;

opportunities for companies to share views and exchange experiences on implementing Responsible Care*;

consideration of how best to encourage all member companies to commit themselves to, and participate in, Responsible Care*;

a title and logo which clearly identify national programmes as being consistent with, and part of, the Responsible Care* concept; and

procedures for verifying that member companies have implemented the measurable or practical elements of Responsible Care*.

AECI, AEL and all the companies in Chemserve are signatories to Responsible Care*. In South Africa, signatories have their compliance with the management practice standards verified by third party auditors. The majority of signatory companies within the AECI Group have been audited successfully against these standards.

In the broader arena of broad-based corporate responsibility, it was most pleasing that AECI was included in the JSE Limited's Socially Responsible Investment Index for the first time in 2009.

Looking to the future

King III, which comes into effect in 2010, calls for the sustainability aspects of a company's annual report to be independently assured. Accordingly, KPMG Inc. was appointed to conduct an assessment of the completeness and verifiability of the data underlying the SHE section of this report, to enable management to prepare adequately for this requirement.

It is intended that this assurance will be in place for the 2010 report, so that an independent assurance provider will be able to provide assurance over both the accuracy and the completeness of the report.

The AECI Group continues to face a number of challenges in the corporate citizenship arena. Nonetheless, it has been pleasing to be able to report that the improved SHE performance of 2008 continued through 2009. The Group is committed to sustaining this trajectory in 2010.

* Trademark

Gary Cundill

Group manager: technology and SHEQ
Woodmead, Sandton

30 March 2010

2008

ACHIEVEMENTS

After several years of rising injury rates, it is very pleasing to report a 27 per cent reduction in the Group’s Total Recordable Incident Rate (TRIR) for employees. At year-end, this indicator stood at 0,83 as result of deliberate efforts by the operating companies.

The wellness programme, described in more detail elsewhere in this report, has met with real acceptance from employees. Buy-in by unions has been particularly gratifying.

Many of AECI’s operations have the potential to impact significantly on the environment. Consequently, the management of environmental issues is very important. The ISO 14001 environmental management standard is the most widely recognised, externally verifiable standard in use internationally. AEL has implemented the standard at its main South African manufacturing operations, and at most of its international sites. Most of Chemserve’s manufacturing facilities that can have a significant environmental impact have the standard in place, and, in the property segment, Heartland Leasing has implemented ISO 14001 at its Umbogintwini site.

AECI has registered two projects under the Clean Development Mechanism (CDM). The second project, a nitrous oxide reduction installation at No. 11 nitric acid plant, has reduced emissions of this potent greenhouse gas by 80 per cent.

DISAPPOINTMENTS

Regrettably, the Group recorded two work-related employee fatalities during the year:

  • in March, a temporary employee doing work at a KwaZulu-Natal Chemserve subsidiary site, died in a storage vessel that was being cleaned; and
  • in March, a fire occurred in an explosives manufacturing building at AEL’s Modderfontein site. An employee suffered serious burns in the incident and subsequently died.

Equally regrettable were the two contractor fatalities:

  • in January, an employee of a garden services company contracted to AEL took shelter beneath a tree at Modderfontein during a storm. The tree was struck by lightning resulting in the man being killed; and
  • in December, a driver working for a logistics company contracted to AEL was crushed to death by his vehicle.
  • SAFETY AND OCCUPATIONAL HEALTH PERFORMANCE

  • Safety and occupational health performance is expressed as the Total Recordable Incident Rate (TRIR). AECI benchmarks itself against an appropriate grouping of international companies and remains of the opinion that, while zero incidents must be the ultimate target, the interim maximum tolerable level should remain at 1,0 for 2009.

The benchmarked TRIR graph presented here has been compiled by an independent consultant from the latest information available from the various companies’ websites at the time of writing. Due to minor variations in reporting formats, the rate was recalculated in certain cases to provide results uniform with the USA’s Occupational Safety and Health Administration system of reporting.

TRIR PERFORMANCE BY AECI COMPANY

AEL’s employee incident rate increased marginally from 2007’s 0,59 to 0,75, and Property’s rose from 2007’s 1,13 to 1,45. Commendable improvements in incident rates were achieved at Chemserve and SANS. In 2007, these companies’ rates were at 1,64 and 1,63 respectively and, in 2008, they declined to 1,00 and 0,44.

CAUSES OF INJURIES AND OCCUPATIONAL ILLNESSES (EMPLOYEES)

The circumstances that led to recorded occupational injuries and illnesses in 2008 were not dissimilar from those observed in previous years. The nature of much of the Group’s business involves dealing with potentially hazardous chemicals, including explosive, corrosive and toxic substances. Automated operations and protective systems can reduce risks to employees, but do not eliminate them. Automation is being implemented increasingly in the Group. Nevertheless, incidents arising from manual handling remain a significant issue, particularly in those companies with an ageing workforce. Injuries due to falling, usually linked to carelessness, remain a significant component of the incidents reported. The proportion of incidents related to moving machinery decreased compared with previous years.

It is pleasing to note that, for the first time in recent years, no recordable injuries arose as a result of road accidents on Company business.

    Employees   Contractors   Combined  
  AEL 0,75   0,91   0,77  
  Chemical Services 1,00   2,69   1,33  
  SANS Fibres 0,44   0,18   0,32  
  Property 1,45   0,49   0,68  
  AECI Group 0,83   1,07   0,89  


TRIR performance by AECI company

The number of occupational illnesses reported in 2008 declined. One employee was removed temporarily from the workplace due to high lead levels in his blood. Two employees were unable to continue with their normal work, due to occupational asthma. No cases of noise-induced hearing loss were reported.

    Serious   Moderate   Total  
  Explosions      
  Thermal burns 5   3   8  
  Chemical exposure 3     3  
  Chemical burns 3   2   5  
  Injuries from falling 8   2   10  
  Injuries from moving machinery 4   2   6  
  Injuries from handling objects 10   8   18  
  Injuries from lifting objects   1   1  
  Other 5   4   9  
  Total 38   22   60  


Causes of injuries and occupational illnesses (employees)

Occupational illness rate - employees

OTHER INCIDENTS OF SIGNIFICANCE

a road tanker containing ammonium nitrate solution, contracted to AEL, caught fire while travelling on the N3 south of Johannesburg;

at AEL’s Modderfontein site, 14,5 tons of 25 per cent ammonia solution were spilled into the factory stormwater system after the drain valve of a tanker was left open;

at the same site, 4,5 tons of 71 per cent sulphuric acid were spilled into the factory stormwater system, after a valve broke off a tank. Although the tank was bunded, the acid sprayed over the top of the wall;

a truck operated by a Chemserve subsidiary spilled 200 kg of ammonium lauryl sulphate onto the N1 near Midrand, resulting in the road being closed for clean-up; and

complaints were received from residents near Modderfontein. These complaints related to ash dust emissions from Heartland’s remediation operations where ash is being made available to third parties for recycling.

ENVIRONMENTAL PERFORMANCE

This section deals with current operations and excludes waste arising from land remediation activities. Data relate to the Group’s main operations in South Africa.

The rising trend in water consumption by the Group is reversing, with consumption falling 14 per cent in 2008. AEL and Chemserve both achieved reductions. The shutdown of part of SANS’s operations accounted for most of 2008’s decrease.

There was a 27 per cent decrease in the Group’s electricity consumption. AEL’s consumption remained largely unchanged, as did that of Property, while Chemserve’s usage fell by 18 per cent. The sale of Dulux in 2007 contributed to the Group’s year-on-year reduction. The largest change however, occurred as a result of the shutdown of part of SANS’s operations.

In addition to electricity, the Group’s operations also consume energy in the form of coal, gas and fuel oil. Total energy consumed in 2008 was 21 per cent lower than in 2007. This reduction was, by and large, due to the changes in electricity usage reflected above.

Hazardous waste generated by Group operations increased by 2 per cent in 2008. AEL recorded a significant improvement, after closure of the capped fuse plant and reduced production at the safety fuse plant. This was more than offset, however, by a large increase in waste arisings from Chemserve. Most of this was due to unusually large amounts of waste from a subsidiary after a plant shutdown and from a clean-up exercise conducted at Chemserve’s Chloorkop site. Again, the closure of certain SANS plants led to a large drop in total waste arisings.

The issue of global warming, with greenhouse gases being a major contributor, is receiving increasing attention. Most of this is focused on the burning of fossil fuels for energy, which generates carbon dioxide (CO2).Consequently, the potential for global warming is commonly expressed in terms of carbon dioxide equivalence. The Group’s CO2 emissions fell by 8 per cent in 2008. AEL achieved some reductions and SANS’s emissions halved, for reasons already stated.

Emissions other than CO2 can also have a significant impact in terms of global warming potential.

Ammonium nitrate is used extensively in the explosives and fertilizer industries. It is manufactured from nitric acid and ammonia. AEL has two nitric acid plants at Modderfontein, the No. 9 and No. 11 plants. Nitrogen oxide gases are produced through the oxidation of ammonia on a platinum-rhodium metal catalyst gauze in the ammonia burners of AEL’s nitric acid plants.

Most of the gas generated is in the form of nitric oxide, which is absorbed by water to form nitric acid. Some of the gas produced is in the form of nitrous oxide, which is typically released into the atmosphere as it does not have any economic value or toxicity at typical emission levels. However, it is a greenhouse gas with a global warming potential approximately 300 times per unit mass that of CO2.

To combat global warming, a number of countries have ratified the Kyoto Protocol, thereby committing to reduce their emissions of greenhouse gases, or to engage in emissions trading were they to maintain or increase emissions of these gases.

Provision was made in the Kyoto Protocol for the registration of Clean Development Mechanism (CDM) projects, which allow participants in developing countries to generate Certified Emissions Reductions (CERs) by lowering their emission levels of greenhouse gases. CERs can then be sold to those entities that are under an obligation to reduce greenhouse gases but are unable to achieve the required reduction.

AEL has registered two CDM projects with the United Nations Framework Convention on Climate Change (UNFCCC). These are for the No. 9 and No. 11 nitric acid plants, and they were registered in November 2007 and February 2008 respectively. The projects involve the installation of secondary catalysts in the ammonia burners of the plants, below the primary gauze catalyst. This secondary catalyst decomposes the residual nitrous oxide without affecting the production of nitric acid

The secondary catalyst in the No. 9 plant was installed in November 2007 but had to be removed in June 2008 when the method of installation caused the primary catalyst to fail on two occasions. AEL is currently exploring various alternatives to rectify this situation.

The project on the No. 11 nitric acid plant has been far more successful. The secondary catalyst was installed in September 2007 and has reduced nitrous oxide emissions consistently by 80 per cent. This plant has a production capacity about 2,5 times that of the No. 9 plant, meaning that the effect of the secondary catalyst on total emission levels is far greater than could be achieved on the smaller plant.

In 2008, these projects reduced the emissions of greenhouse gases from the nitric acid plants by the equivalent of 239 000 tons of CO2. To put this in perspective, the reduction is significantly greater than the AECI Group’s total CO2 emissions of 153 000 tons in 2008.

LAND REMEDIATION

The guiding principles underlying AECI’s remediation activities are to protect human health and the environment; to use good science, proven concepts, and best available techniques not entailing excessive cost; and to work with regulatory authorities and share information with interested and affected parties.

A risk-based approach guides the remediation process and human health and environmental risk assessments are undertaken at appropriate stages in individual projects. These assessments influence subsequent activities.

Annual reviews of the Group’s environmental liability have been conducted by independent consultants since 1995 and the level of detail increases each year. The reviews are a reasonable approach to quantifying the potential future liability that has resulted from past operations. It is assumed that good management and operating practices at current operating sites will reduce remediation requirements over time.

Liability review findings are used to plan detailed remediation projects and to motivate Group companies to initiate necessary remediation and environmental management activities. At end-2008, the environmental liability for the Group was estimated at R146 million for remediation.

RESPONSIBLE CARE*     

Responsible Care* is the global chemical industry’s voluntary initiative for continuous improvement of performance in safety, health and environmental practices. It is a public commitment to responsible management and stewardship of products and services throughout the lifecycle of products. It is also the vehicle used by the industry in its pursuit of improved performance in the areas of safety, health, the environment and product stewardship.

Responsible Care* was launched by the Canadian Chemical Producers’ Association in 1984 and has now been adopted in 53 countries. The Chemical and Allied Industries’ Association is the custodian of Responsible Care* in South Africa. In line with the guidelines of the International Council of Chemical Associations, the South African programme is based on eight fundamentals:

a formal commitment by each member company to a set of guiding principles;

a series of codes, guidance notes and checklists to help companies fulfill their commitment;

the development of indicators against which improvements in performance can be measured;

open communication on safety, health and environmental matters with interested parties, both inside and outside the industry;

opportunities for companies to share views and exchange experiences on implementing Responsible Care*;

consideration of how best to encourage all member companies to commit themselves to, and participate in, Responsible Care*;

a title and logo which clearly identify national programmes as being consistent with, and part of, the Responsible Care* concept; and

procedures for verifying that member companies have implemented the measurable or practical elements of Responsible Care*.

In South Africa, signatories have their compliance with the management practice standards verified by third party auditors. The following AECI subsidiaries have been audited successfully against these standards:

AEL (Modderfontein operations)

Akulu Marchon

Chemfit

Chemical Initiatives

Chemiphos

Chemserve Perlite

Chemserve Systems

Duco Speciality Coatings

Dussek Campbell

Heartland Leasing (Umbogintwini operations)

ImproChem

Lake International Technologies

Resitec

Senmin

Specialty Minerals SA

LOOKING TO THE FUTURE

The challenges faced by companies in the SHE arena do not normally change dramatically from year to year. AECI’s management continues to be concerned by two primary issues arising from the context in which most of the Group’s companies operate:

a serious skills shortage, impacting on the Company’s ability to staff operations with personnel who have the necessary aptitude, training and experience. The effect of this is felt particularly at supervisory and middle management levels; and

a culture of risk-taking, impacting on the level of care that employees take in the course of their employment not to cause harm or injury to themselves, to others or to the environment.

The causes underlying this culture are numerous, but two major contributing factors are the inordinately high level of violent crime with which employees in South Africa have to co-exist, and a degree of fatalism arising from the high levels of untreated HIV-infection in the community.

Further training in the area of process safety will continue to be made available throughout the Group, as this is still seen as a weak area in AECI’s SHE efforts.

The bulk of AECI’s environmental legacy remediation spend is now complete and work in 2009 will focus mainly on monitoring.

It has been pleasing to report the improved performance of AECI in the areas of safety, health and the environment. The challenge now is not only to maintain this improvement but to better it in future years.

Jacques Pienaar
General manager
Group human resources and SHE
Woodmead, Sandton

23 February 2009

* Trademark

2007

ACHIEVEMENTS

The AECI Group comprises a broad spectrum of businesses. They range from large chemical operations such as those producing mining chemicals, to the manufacture of explosive initiating systems, to property leasing. Consequently, the issues they face in the SHE arena are very different. It is inevitable, therefore, that some degree of generalisation will occur when commenting on such diverse activities in a single report.

The information disclosed here is based on data received from each business. However, the AECI Group as a whole is under consideration and, therefore, the focus is on issues of Group-wide concern.

Competent management of environmental issues is crucial. The ISO 14001 environmental management standard is the most widely recognised, externally verifiable standard in use internationally. The majority of sites in the Chemserve group now have it entrenched as part of their business processes. AEL has also implemented the standard throughout its South African operations and at most of its international sites.

Treatment plant upgrades at AEL’s Modderfontein operations resulted in a significant reduction in lead levels in the effluent from plants manufacturing initiating systems. The Modderfontein site as a whole received its new permit from the Department of Water Affairs and Forestry, and is achieving compliance levels of more than 94 per cent.

AEL’s carbon credit project is progressing well. The first nitric acid plant is now registered and is generating credits. More details on this are given later in this report.

In 2005, AECI reported that it had reduced significantly the potential risks to communities surrounding its Umbogintwini site by enclosing sulphur dioxide operations and installing a scrubbing system to manage fugitive gas emissions. In 2007, this risk reduction programme was extended to chlorine handling facilities at the two water treatment plants that Heartland Leasing operates at that site. These facilities have been enclosed, with leak detection and scrubbing systems in place.

Heartland Leasing received a Special Commendation at the Mail & Guardian’s annual Greening the Future Awards. This was in recognition of the successful remediation of the Duikersvlei Stream at AECI’s former fertilizer site at Milnerton, Western Cape. The site was sold in 2006 and the remediation project was detailed as a case study in AECI’s 2006 annual report to shareholders.

DISAPPOINTMENTS

Regrettably, the Group recorded two work-related fatalities during the year. A Chemserve employee died inside a vessel while cleaning it and a driver contracted to Chemserve was fatally injured in a motor vehicle incident, while returning from a delivery trip.

It is most disappointing that the Total Recordable Incident Rate (TRIR) for AECI employees rose from 1.06 in 2006 to a rate of 1.13. This is above the maximum tolerable level set at 1.0. TRIR measures the number of injuries and occupational illnesses for every 200 000 hours worked. All work-related injuries and illnesses, requiring more than first aid treatment, are recorded.

It is encouraging to note, however, that the TRIR for contractors working on behalf of AECI companies fell sharply from 2006’s rate of 1.93 to 0.50. As a result, when contractor incidents are included with AECI’s, the combined rate falls to 0.98.

SAFETY AND OCCUPATIONAL HEALTH PERFORMANCE

Safety and occupational health performance is expressed as the TRIR. AECI benchmarks itself against an appropriate grouping of international companies and remains of the opinion that, while zero incidents must be the ultimate target, the interim maximum tolerable level should remain at 1.0 for 2008. Unfortunately the disappointing result of 2007 confirms that the rising trend, since the low achieved in 2003, has not yet been turned around.

The benchmarked TRIR graph presented has been compiled by an independent consultant from the latest information available from the various companies’ websites at the time of writing. Due to minor variations in reporting formats, the rate was recalculated in certain cases to provide results uniform with the USA’s Occupational Safety and Health Administration system of reporting.

TRIR PERFORMANCE BY AECI COMPANY

    AECI employees Contractors Combined  
  AEL 0.59 0.30 0.54  
  Chemical Services 1.64 0.38 1.43  
  SANS Fibres 1.63 1.18 1.51  
  Heartland 1.13 0.23 0.49  
  AECI Group 1.13 0.50 0.98  

Excellent results were again achieved by AEL. However, high incident rates at Chemserve and SANS Fibres (SANS) impacted negatively on the Group’s overall TRIR. Chemserve’s incident rate for the year rose to 1.64 from 2006’s already high figure of 1.51. The majority of incidents occurred in the first six months, with the performance thereafter indicating that the worsening trend, linked largely to unsafe acts, appears to have been reversed. SANS’s incident rate also increased to 1.63 from last year’s figure of 1.56. The major problems at SANS appear to be linked to the uncertainties and disruptions in the business in 2007.

Incidents and hours from Dulux’s operations, until 1 October 2007 when ownership transferred to ICI plc, have been included in the calculation for the AECI Group figure.

Although the incidents that occurred in 2007 involved a wide range of mechanisms, several causes stand out:

the nature of much of the Group’s business involves dealing with potentially hazardous chemicals, including explosive, corrosive and poisonous substances. Whilst automated operations and protective systems can reduce the risk to employees, they cannot eliminate them. Appropriate, proceduralised methods of working should reduce further the number of incidents arising from this cause;

whilst injuries due to falling may seem unrelated to industry-specific issues, they can be severe. Carelessness remains the main contributory factor for this group of injuries;

incidents related to moving machinery arise from both static installations such as pumpdrives, and vehicle-related incidents, usually forklifts. Guarding and procedural systems provide the main forms of risk mitigation, and incidents are usually the result of poor working practices;

increasingly the Group’s operations are being automated, not least because this reduces the inherent operational risk to employees. Nevertheless, incidents arising from manual handling remain a significant issue, particularly in those companies with an aging workforce;

South Africa’s increasingly congested roads, and poor road conditions elsewhere in Africa, lead to a significant risk to the safety of the Group’s employees and contractors. The majority of the Group’s products are transported by road.

  • CAUSES OF INJURIES AND OCCUPATIONAL HEALTH INCIDENTS (EMPLOYEES)
    Serious Moderate Total  
  Explosions 3   3  
  Thermal burns 4 5 9  
  Chemical exposure 6 1 7  
  Chemical burns 8 7 15  
  Injuries from falling 12 5 17  
  Injuries from moving machinery 11 5 16  
  Injuries from handling objects 8 3 11  
  Injuries from lifting objects 3   3  
  Noise-induced hearing loss   1 1  
  Road accidents – Company business 3   3  
  Cumulative trauma disorders 2   2  
  Other 1 2 3  
  Total 61 29 90  


There was an increase in the number of occupational illnesses reported in 2007. Three employees had to be removed temporarily from the workplace due to high lead levels in their blood. Two employees were unable to continue with their normal work, due to occupational asthma. Two repetitive strain injuries occurred, linked to previous medical conditions. One case each of noise-induced hearing loss and post-traumatic stress disorder were reported.

 

OTHER INCIDENTS OF SIGNIFICANCE

an explosion occurred in the scrubbing system of a Chemserve plant in Brazil. There were no injuries but production was disrupted for three days;

four production-related incidents occurred at Chemserve manufacturing plants in Umbogintwini, resulting in fumes affecting nearby manufacturing facilities;

at AEL’s Modderfontein operations, an explosion occurred within the compartment of a lead azide dosing station. This caused significant damage to the machinery, but no injuries;

at a Chemserve plant in Brazil, a complaint was received from the neighbouring community regarding odours. These were attributable to the first-time production of a chemical for lubricant applications. The process was stopped and is being reviewed in an attempt to eliminate the problem;

at SANS’s Bellville operations, heating fluid was released to atmosphere after a relief valve lifted. The neighbouring community was inconvenienced by the strong smell that resulted;

a number of road transport-related incidents occurred whilst products were being moved by contractor companies. In AEL’s operations, eight incidents occurred that involved more than one ton of ammonium nitrate or emulsion being spilled. No significant environmental impacts resulted. A tanker moving product for Chemserve rolled, causing the temporary closure of a highway. Tragically, another vehicle moving material for Chemserve collided with a bus, resulting in the death of the vehicle’s driver.

ENVIRONMENTAL PERFORMANCE

This section deals with current operations. Data do not include waste arisings from remediation activities, nor AEL’s operations outside of Modderfontein.

Hazardous waste arisings from Group operations decreased substantially from 6 221 tons in 2006 to 4 476 tons. Three main factors contributed to this: only nine months of Dulux’s operations, a major contributor in the past, are reflected in 2007’s figures; SANS tightened the controls over its waste disposal area; and AEL closed a capped fuse plant and reduced safety fuse production early in 2007.

hazardous_waste_arisings hazardous_waste_company


Group water usage rose by 12 per cent to 4 767 000 kilolitres. The two main contributors to this were AELand Chemserve. AEL’s consumption rose to 2 028 000 kilolitres, largely as a result of the need to run older manufacturing plants in parallel with new ones, as the latter were being commissioned. SANS had previously committed to a 15 per cent reduction in water usage but was unable to achieve this. Due to business reasons, the Group deemed it inadvisable to spend the capital required for the planned water saving project.

water_usage water_company

Group energy consumption rose by 7 per cent, compared with 2006. The majority of this increase occurred at Heartland Leasing (Umbogintwini), as a direct result of site tenants increasing their demand for steam. SANS used 3 per cent less energy during the year, associated with a decrease in production rates. Load-shedding led to SANS using 8 per cent less electricity but this was offset by increased heavy fuel oil usage. AEL’s total energy consumption rose by 2 per cent, again as a result of the need to run old and new plants concurrently. Chemserve’s energy consumption rose by 15 per cent. After the year-end, the Group’s electricity consumption decreased by 24 per cent owing to closures at SANS. Historically, SANS’s operations were the largest users of electricity in the AECI Group.

energy_usage energy_company

SUSTAINABILITY

The issue of global warming, with greenhouse gases being a major contributor, has been the subject of increasing attention in recent years. Most of this attention is focused on the burning of fossil fuels for energy, which generates carbon dioxide. Consequently, the potential for global warming is commonly expressed in terms of carbon dioxide equivalence. Emissions other than carbon dioxide, however, can also have a significant impact.

The Kyoto Protocol calls for reductions in greenhouse gas emissions to levels which existed in 1990 in those developed countries which are signatories to the Protocol. These reductions must be achieved by 2012. The signatory countries can buy the equivalent carbon credits arising from reductions in emissions in developing countries, thus offsetting their own emissions against the reductions required. Developing countries are currently excluded from the Protocol’s requirements.

A case relevant to AECI is that of nitrous oxide at Modderfontein – one ton of nitrous oxide is equivalent in its global warming potential to the release of 310 tons of carbon dioxide. Nitrous oxide occurs as a waste product in the production of nitric acid, and AEL operates two nitric acid plants at Modderfontein.

The Clean Development Mechanism (CDM) was instituted to facilitate the reduction of greenhouse gas emissions in developing countries. The CDM operates under the guidance of the United Nations Framework Convention on Climate Change (UNFCCC). AEL is one of the few companies in South Africa that has embarked on a CDM programme.

AEL’s nitrous oxide abatement project for its No. 9 nitric acid plant was registered as a CDM activity at the UNFCCC in November 2007. With the secondary catalyst installed in the No. 9 nitric acid plant, certified emissions reductions (CERs) were generated from the time of registration. At year-end, AEL had generated 15 123 CERs. The measured emission reduction for 2007 was 17 738 tons carbon dioxide equivalent. This needs to be verified by an independent, designated operating entity at the end of the current campaign, expected to continue until February 2008.

The No. 11 nitric acid plant nitrous oxide abatement project is due to be registered as a CDM activity at the UNFCCC in February 2008. At present, the plant already has secondary catalyst installed for the abatement of nitrous oxide. The generation of CERs will commence as soon as the project is registered.

The next step is to arrange for the necessary verification audits once the current production campaigns have been completed. It will then be possible to begin marketing the CERs to potential buyers for the expected carbon credits.

LAND REMEDIATION

Annual reviews of the Group’s environmental liability have been conducted by independent consultants since 1995 and the level of detail increases each year. The scope of the 2007 review was to:

list the sites owned, used or vacated by AECI businesses;

establish the extent of potential contamination on these sites;

estimate remediation work and cost, and split the costs into regulatory and discretionary. Regulatory costs are those that must be incurred to comply with legal requirements; discretionary costs are those that are likely to be incurred to meet the requirements of future land redevelopment plans. Discretionary costs have not been validated and estimates for unknown amounts are not provided for, including those costs likely to be incurred only at the time of plant or site closure;

establish the timing of work by considering safety and health issues, environmental legislation, and land redevelopment needs;

estimate potential post-remediation costs. Operation and maintenance may be required until remedial goals are reached and monitoring will be used, where appropriate, to demonstrate to the relevant authorities that remediation has been successful; and

record findings and document any exclusions from the scope of work which may be relevant.

The guiding principles of AECI’s remediation activities are to protect human health and the environment; to use good science, proven concepts, and best available techniques not entailing excessive cost; and to work with regulatory authorities and share information with interested and affected parties.

A risk-based approach guides the process and human health and environmental risk assessments are undertaken at appropriate stages in individual projects. These assessments influence subsequent activities.

The estimates are a reasonable approach to quantifying the potential future liability that has resulted from past operations. It is assumed that good management and operating practices at current activities will reduce remediation requirements over time.

Liability study findings are used to plan detailed remediation projects and to motivate Group companies to initiate necessary remediation and environmental management activities. At the end of - 2007, the environmental liability for the Group was estimated as R140 million for regulatory remediation. Remediation is scheduled for completion by 2010, except for that to be done only at plant/site closure.

RESPONSIBLE CARE *

The Canadian chemical industry launched the Responsible Care* initiative in 1984. The aim was to raise standards of operation in the industry through, inter alia, the provision of best practice standards. Responsible Care has been adopted worldwide and AECI is a signatory. In South Africa, the Chemical and Allied Industries’ Association is the custodian of the Responsible Care programme.

The following best practice standards are included in the programme:

health and safety of persons;

transportation of chemicals;

storage and distribution of chemicals;

waste management and pollution control;

community awareness and emergency response;

product stewardship; and

process safety.

Internationally, signatories to Responsible Care are required to submit self-assessment questionnaires against these standards every two years. In South Africa, the initiative has gone beyond this. A verification protocol has been developed to demonstrate, through independent third parties, a company’s compliance with the Responsible Care management practice standards. AEL’s Modderfontein operations have been audited successfully against these standards, as have the following companies in the Chemserve group:

Akulu Marchon

Chemical Initiatives

Duco Speciality Coatings

Lake International Technologies

community awareness and emergency response;

Senmin

Specialty Minerals SA

CONFORMANCE WITH SHE STANDARDS

At the beginning of every year, each business submits a Letter of Assurance to the Group chief executive. This letter sets out the primary SHE-related risks facing the business, together with the approach taken to manage them. The letter also describes the business’s compliance with the AECI SHE policy and standards, noting any material issues in this regard.

SHE-related risks faced by businesses differ, due to their varied fields of operation. However, certain risks are common to most areas of the Group, and typically do not change significantly year-to-year:

chemical exposure-related incidents, largely affecting employees and contractors in close contact with raw materials and products;

process safety-related risks, resulting in fires, explosions or significant releases of hazardous materials. Such incidents may occur on company sites or when goods are in transit;

the dangers posed to employees and contractors travelling by road; and

the dangers posed to employees and customers working on sites controlled and managed by customers. Such sites might range from chemical facilities to underground mining operations.

  • LOOKING TO THE FUTURE

In the 2006 annual report to shareholders, a list of challenges facing AECI was presented. Perhaps it is the nature of the environment in which the Group operates that these challenges remain as relevant in the coming year. Indeed, they may well have been exacerbated by the apparently worsening skills shortage and management difficulties arising from running operations in an energy-scarce country:

instilling a culture of safe working practices is perhaps the greatest challenge. Until this is in place, too many relatively minor incidents, which carry the potential for significant consequences, will continue to plague the business;

linked to this, a shortage of skills and competence at supervisory and middle management level is hampering efforts to implement and maintain the necessary disciplines, particularly in operational areas;

expertise and operational competence in the area of process safety is of particular concern; and

significant effort in the remediation arena is still required to complete the work being done to rectify environmental legacies. Linked to this is the need to ensure that the mistakes of the past are not repeated, creating fresh legacies that, in turn, will require remediation.

All rights Reserved.