Syndicated Coal Theft in South Africa

Syndicated Coal Theft in South Africa

THE RISE OF COAL THEFT IN SOUTH AFRICA: AN INVESTIGATOR’S PERSPECTIVE

 

By Michael Barker & Partners – Commercial Crime Investigators

 

Over the past couple of years South Africa has experienced a significant escalation in the occurrence of syndicated coal theft within its borders and over the past year alone Michael Barker & Partners have been responsible for investigating and exposing numerous instances of large-scale coal theft which have occurred at some of South Africa’s leading Coal Mines.

The recent escalation of coal theft experienced in South Africa can be attributed to the rising global and regional demand for energy, along with abundant coal reserves in Southern Africa. These two factors collectively render the region particularly susceptible to instances of large-scale coal theft.

The steady increase in coal consumption and the accompanying demand for the product is a global trend which is forecast to continue for years to come. The consumption and demand of coal is expected to increase to such an extent that it could account for nearly 69% of the total global energy consumption in 2030. Locally, coal accounts for a significant share of Southern Africa’s primary energy needs. A large portion of our local coal production is also sold to international markets in Europe, India and China. As can be seen the consumer market is almost endless and there is no telling where coal which has been misappropriated locally could end up.

The re-occurring instances of coal theft experienced in the country and the various syndicated coal theft investigations conducted by Michael Barker & Partners have thus far revealed that these unlawful operations are accompanied by similar characteristics and tell-tale signs which should not be overlooked as these traits are usually indicative of coal theft.

Apart from the usual anomalies experienced in cases of theft and fraud the presence of the following factors could be an indication that your coal extraction and processing operation is the target of an organised crime syndicate:

  • Intentional bypassing or break down of systems and control measures by employees employed within the mine;
  • Omissions by employees in key positions to implement basic systems and control measures to safeguard against the loss of coal;

The two factors listed above are utilized by syndicates in order to enable a chaotic but functioning system to be present within the coal extraction and processing operation. The purpose of creating chaos is to make it particularly difficult for anyone to visually identify the misappropriation of coal thereby forcing the operation to rely on the figures and measurements recorded which will ultimately be manipulated to conceal the coal theft. The presence of the factors listed below are signs which could be indicative of figure and report manipulation having occurred or currently occurring within the coal extraction and processing operation:

  • The reliance and unequivocal acceptance of a single method of measuring/recording of the amount of coal produced and the accompanying lack or unrectified consistent inaccuracy of additional measurements/recordings to verify or reconcile back to the accepted production figure;
  • Large discrepancies between the expected monthly yield and the sales effected in terms thereof;
  • Large discrepancies between the survey figures and the sales performed in terms thereof;
  • Unusually high relative densities applied to the coal product;
  • Large discrepancies between survey figures and the amount of product available on the floor; and
  • The manipulation of any figures or reports relating to the production, sales or movement of coal.

The above are but a few of the most common traits which consistently present themselves in instances of large scale syndicated coal theft.

The notorious presence of the above traits in the majority of the reported cases of large scale coal theft is attributed to the fact that the syndicates responsible for the misappropriation of large quantities of coal generally recruit employees in key positions, employees of logistics companies responsible for coal haulage and the security personnel stationed on the premises of the colliery. The recruitment of individuals in these three facets of the coal mines operation makes it possible for coal to leave the collieries undetected and for these instances of coal theft to remain undetected.

Infiltration of a logistics company responsible for hauling coal at a coal extraction and processing plant ensures that the stolen loads of coal can be moved around and removed from the facility without being detected as it is removed under the misrepresentation that the transporter is legitimately hauling the respective load. The recruitment of security personnel aids in the physical removal of coal from the premises of the coal mine, and lastly, the recruitment of employees in key positions such as Surveyors, Accountants, Reconciliation Clerks or Weighbridge Personnel ensures that the loss remains concealed through the manipulation of figures and various reports.

The only way coal theft is capable of being concealed is through the continuous and articulate manipulation of figures and reports utilized to record and keep track of coal throughout the production and distribution process. The manipulation of figures and reports can take various forms and we have included a list of the most commonly encountered forms of manipulations which Michael Barker & Partners have encountered:

  • Fraudulently diminishing production values and misappropriating the difference between the manipulated production figure and the actual production figure;
  • Misrepresenting loads of high grade coal as being low grade coal and consequently purchasing high grade coal at the value of low grade coal thereby increasing profit margins when the coal is eventually sold to the consumer market;
  • Manipulation of weighbridge scales and the weights recorded by the scales;
  • Intentionally manipulating the relative density values applied to the coal thereby affecting the expected monthly yields to allow for any surplus coal produced in excess of the expected monthly yield to be misappropriated and go undetected;
  • The manipulation of the stock pile names reflected on the survey reports by switching the respective names of stock piles hereby allowing a high grade coal stock pile and the measurements and figures in terms thereof to be reflected on the survey report as being a low grade coal stock pile and vice versa. This method of manipulation is particularly unique and detection of this kind of manipulation is challenging to detect.

Fortunately all the different forms of the manipulation element present in the modus operandi utilized by syndicates is flawed in that the shortfall of coal will inevitably be discovered as all figures utilized throughout the production and distribution process can only be manipulated up to a given point before large discrepancies are identified.

The timeous identification of large discrepancies is however dependent upon the diligent performance of efficient and accurate reconciliations between relevant figures and if the individuals responsible for these processes have been recruited by the syndicate, or alternatively, if these processes are not performed accurately and efficiently, there is no telling how long the coal theft will go undetected, and to what extent the loss will escalate.

Once the coal has successfully been removed from the premises of the relevant mine there is a vast majority of local and international consumers to whom the coal can be sold and the chances of recovering or even conclusively identifying the misappropriated coal are virtually non-existent.

The steady increase in demand and consumption of coal over the last few years has been accompanied by a steady increase in syndicated coal theft. With the projected increase in consumption and demand of coal forecast for the future we can be sure that syndicated coal theft will present itself more and more frequently within the contours of Southern Africa.

Donovan Raubenheimer

Michael Barker & Partners Commercial Crime Investigators