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Alexander Machkevitch: “Digital progress, clean energy, and ethical growth will facilitate the transition to the economy of the future”

Expert opinion
28 May 2021
Александр Машкевич: «Цифровой прогресс, чистая энергетика и этичное развитие должны способствовать переходу к экономике будущего»
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What is ERG’s agenda for SPIEF 2021?

ERG is a large multinational metals and mining group, which operates in 15 countries and sells its products to over 40 countries. The Group has succeeded in both modernizing enterprises which have a history spanning many decades, and also developing new large-scale greenfields. From Kazakhstan to Africa and Brazil, we launch major infrastructure projects and establish supply chains for the most rapidly growing sectors, including electric vehicles, smartphones and tablets, construction, and steel.

SPIEF provides an opportunity for the Group to share its expertise and ideas for business development, hold meetings with partners, and sign new agreements. In 2021, two years since the last Forum, this is more valuable than ever.

That said, I am deeply saddened that Alijan Ibragimov, my dear friend and partner who Patokh Chodiev and I founded the Group with is not here to share our pride in these achievements. Alijan passed away in February this year, and his absence will be felt profoundly by SPIEF participants.

What are the changes that have occurred in the Group over the last two years?

The last two years have seen significant breakthroughs for the Group. I will begin with sustainable development, which lies at the heart of ERG’s business philosophy. At the beginning of 2021, ERG was among the 25 leading global organizations to support Terra Carta, an initiative launched by HRH the Prince of Wales with the aim of helping fulfil the Paris Agreement and the UN Sustainable Development Goals. Alongside the World Economic Forum, Glencore, Anglo American and others, the Group has launched the first industry-level initiative to apply blockchain technology to promote value chain transparency and responsible practices.

We have developed an Atlas of New Professions in Kazakhstan, which is already being successfully used by universities and colleges in the country. We launched an innovative Digital University, a professional and educational e-learning platform. We have also expanded our cooperation with Sber within the Sber ecosystem, including hedging and trading operations in commodity assets.

The Group became one of the first two organizations to finance the new Fund for the Prevention of Child Labour in Mining Communities in the Democratic Republic of the Congo, administered and programmed by UNICEF. This Fund was initiated by the Global Battery Alliance, of which ERG is a founding member. In cooperation with international NGO the Good Shepherd International Foundation, we have kept around 3,000 children out of artisanal and small-scale mining and provided them with education through initiatives such as the new Child Protection Centre in Kolwezi.

We have also established an ESG Committee, which will be responsible for implementing ESG policies in relation to the Group’s projects.

With regard to our operations, Kazakhstan Aluminium Smelter (KAS) has ramped up production by 15 ktpa of aluminium to the design capacity of 250 ktpa and produced 3 million tonnes of aluminium over 14 years of operation.

In Africa, our Metalkol RTR operation has entered the commercial operation stage and is now the second-largest standalone cobalt producer globally, with a design capacity of 24 ktpa and 120 ktpa of cobalt and copper respectively.

At the Aksu Ferroalloy Plant, innovative furnace No. 64 was put into operation following renovation, which will result in an increase in ferrochrome production by 87% by 2024 and a 20% decrease in energy consumption.

In Brazil, we commenced iron ore production at our Pedra de Ferro mine, with a target production capacity of 18 mtpa, and also won an auction to construct a section of the FIOL railway connecting the east and west of the country.

How has the COVID-19 pandemic affected your business?

Of course, employee safety remains our number one priority. And of course, we will keep each of those who have passed away in our memories. In addition to all the necessary safety measures and procedures, we arranged oxygen supplies to hospitals in Kazakhstan, distributed medicine to employees, and initiated campaigns to deliver food packages and protective equipment to elderly people and other vulnerable groups. We provided tens of thousands of face masks, produced at ERG’s own workshops and with our partners for ERG’s employees, their families and local communities.

The Group has developed an extensive business continuity plan and established a dedicated Anti-Crisis Control Centre. Our fully integrated business, advanced technological innovation, and corporate culture have allowed us to minimize disruptions and fulfil both production plans and our obligations to partners. We have strengthened our focus on digitalization, concluded new commercial agreements, and laid the foundation for successful development. We continue to ensure our resources are transformed into sustainable growth.

The metals and mining sector will continue to play a pivotal role in global economic recovery eff orts.

This year marks the 30th anniversary of Kazakhstan’s independence. How has the country changed over the years? And what is the role of ERG in these changes?

30 years ago, the First President of the Republic of Kazakhstan — Elbasy Mr Nursultan Nazarbayev put social responsibility at the core of the country’s development model. At ERG, this progressive concept is also the foundation of our sustainable development strategy.

The past 30 years have seen tremendous change in Kazakhstan. Major economic and social reforms have been introduced and the Republic is now a valued member of worldleading and respectable international organizations.

Operating many of the country’s industrial giants, ERG has 60 thousand employees in Kazakhstan across six regions and accounts for about 2% of Kazakhstan’s GDP and a third of the country’s metals and mining sector. ERG has allocated more than USD 12.6 billion to modernizing existing plants and constructing new facilities.

Kazchrome is the world’s largest highcarbon ferrochrome producer by chrome content and one of the leading suppliers of ferrochrome to Japan. Up to 80% of KAS’s aluminium output is exported to Europe and SSGPO is the large supplier of iron ore products to Russia and China. All of this contributes to strengthening Kazakhstan’s international image.

ERG’s enterprises form the neighbouring cities, and as such, we pay great attention to social policy and personnel and cultural development. This includes the annual Innovators’ Forum, the Land of Masters Arts Festival, and the Student Entrepreneurship Ecosystem programme. We have also launched the City Initiative and in 2021, we opened the School of Active Citizens where ERG’s employees and local residents can improve their financial literacy. Between 2001 and 2020, the Group has carried out social investment activities worth over USD 1 billion in Kazakhstan.

What is the role of technology in ERG’s business operations?

The 2020s constitute a turning point for the transition to a digital economy and climate change mitigation.

ERG has embraced business transformation through digital technologies, which since 2019 have been integrated into our Group-wide Digital Strategy. The Group engages in consultations held by the Eurasian Economic Union (EAEU) and the Eurasian Economic Commission (EEC). Recently, we proposed to accelerate data law development in order to incentivize the exchange of information, whilst also making the EAEU more competitive.

Our partnerships with the World Economic Forum and other international organizations have contributed to realizing sustainability goals within the framework of the European Green Deal and the UN SDGs. I am excited to say that we are now very close to launching a demo version of the ‘Battery Passport’, an initiative of the Global Battery Alliance. It will act as a type of quality seal on a global digital platform for the entire battery lifecycle. We have developed a long-term Environmental strategy. In Kazakhstan alone, we invest over USD 350 million in environmental initiatives and modernizing our facilities. For example, we are replacing the filters at our plants, achieving air filtration efficiency of up to 99.9%.

I firmly believe that digital progress, clean energy and ethical development will facilitate the transition to the economy of the future.

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