2008 performance

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

TRIR - employees		Benchmarked TRIR

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.

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.

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.

Water usage (kl per year)		Water usage by business (%)

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.

Electricity usage (KWh per year)		Electricity usage by business (%)

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.

Total energy usage (GJ per year)		Total energy usage by business (%)

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.

Hazardous waste arisings (tons per year)		Hazardous waste arisings by business (%)

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.

CO2 arisings (tons per year)		CO2 arisings by business (%)

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:

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 safety, health and environmental 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*.

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