General Electric is looking to lock in expected volumes of around $4 billion across the continent over the next five years and use the South Africa rail transport group Transnet as a platform for growth. Alec Hogg spoke with the group’s Head of Transport in Africa Thomas Konditi on the sidelines of WEF Africa, being held in Cape Town, South Africa.
Thomas Konditi is the President and Chief Executive of GE Sub-Saharan Africa. We know General Electric, one of the great companies of the world, based in the United States. How big are you in this part of the world?
Well, my first thing is thanks for the promotion. My boss, Jay Ireland, is actually the CEO for GE Africa. I actually cover GE Transportation for Africa, and then Southern Africa for the company. We’re about, for Africa for $4bn in terms of total revenue. I’d say split out, sort of evenly between oil and gas, the transportation sector, power, and then healthcare.
And transportation focusing on railroads and airlines?
Yes, transportation is two ways. It’s locomotives and then mining. We have a heavy presence in the mining space, and the locomotives is probably about a thousand installed units around the region.
Any reason why you come to the World Economic Forum, here in Cape Town – to the WEF, the Africa Edition?
Well, WEF is great for meeting people that are too busy to meet. Our schedules are all busy and compressed. When you come to WEF, you get a chance to sit down with people for half-an-hour or an hour, and get a lot into one day. I think the people that do come are top-notch/top-calibre. These are the opinion-shapers, makers, and decision makers, so it’s a great place to meet everybody.
Even this year, only one Head of State.
Well, you know, I think last week I spent a whole, four countries, seeing Heads of States. I think a lot of business is done really at the level below that, so this year, even without the Heads of State, it’s really, good to see the business people, some of the Regulators, and then some Ministers.
So it’s more about business this time around, than maybe just hot air.
I think that’s a way to, well yeah. I think you get more to follow up on, from their level, so this will be good for them.
Now, we in South Africa are very surprised that GE decided to go to Nairobi as its Africa, Head Office. What was the thinking behind that?
Well, I think there were a number of things. One is we really didn’t have a headquarters for Africa, prior to 2010, and people were flying in from Dubai or London, or even Atlanta, to try to do business here, very difficult, so we figured that the headquarters needs to be in the region.
The second thing is South Africa is, I think, it’s almost all consuming. It has a very big economy, a lot of complex issues and needs, and opportunities. If you tend to base here, it’s harder to pick up and then go to the DRC or to Ghana, or to Lagos very easily, so Nairobi was good for positioning us a little more close to where we have a lot of our operations. It was also good for the message that the East Side of Africa is just as important as say the West or the South.
East Africa is 250 million people. Having no presence there would have been the wrong message to send. Then finally, the logistics worked out. Kenya Airways flies to most of the African Capitals and the quality of living is good as well, so not a bad choice.
But it is an interesting decision, with most of the multi-nationals housing themselves in Johannesburg, some of them in Cape Town as well, but you obviously, must have looked maybe five, ten, 15 years ahead, to where the way the Continent will look then.
So 50 million people versus 650 million people.
So that’s the deal.
I think you have to be where the customer is. I think, quite honestly, I think you need to be where it’s toughest. When it’s toughest, you get better solutions overall, from your own team. People relate more to what’s going on with the customer, and then, at the same time, you can have a bigger impact as well.
There are 230 plus American companies in South Africa. I say there is one-tenth of that in the rest of Africa, so you have bigger impact, when you take a name like GE and put it in a fast growing country like Kenya, and just say ‘we’re supporting this part of the world, just as much as any other part’.
How are you doing with your renewables? I was reading through the (you can get anything on Google nowadays), so reading through Google and the work that you have been doing with Kenya, on renewables, has been pretty, impressive. South Africa has got its own renewables program. GE is big in the field.
Yes, well renewables has been a part of the power strategy for a while for us. We’ve had some success in Kenya because they’ve gone with a couple of IPP, Wind Farms, actually three now. We’re in two of those, and maybe a little bit of an experimentation. One project, we’re actually the developer, so we’ve put our own equity in. Another one we’re a very close supplier and it’s taught us a few things about doing wind in the region.
Now, South Africa, we tried, I think, five years ago really to get in but the conditions weren’t necessarily right, and I think also for the company, it wasn’t the right time from a support standpoint, but fast forward, five years later, we are back and in force under South African renewable side. We’re going after the next, I think this is the fourth round coming up, but we’re definitely going to be part of that structure, and we’re taking the lessons learned from our transportation business, on localisation, and applying that to the ‘wind business’ and I think we’re going to do quite well.
So you’re going to be big players in the next bidding round?
I think so. I think there’s no better time. I think we’ve learnt a lot around the world and in, actually, in other parts of Africa around costs, and how we support it and then localisation. I think it will make us quite competitive.
The railroad side though must be very big for you in South Africa, given what Transnet is up too.
Yes, well Transnet has certainly, you know, they’ve been a great customer. We have a, I think, are obviously the largest partnership in the region. However, if you look at the volume of business that we’re were able to lock in, from 2010 to 2014, you know, maybe it’s a billion plus, just north of a billion Dollars. If I look out the next five years, it’s probably four billion, right.
I mean there’s another four or five countries that are coming on-line, so South Africa is clearly the anchor, but Mozambique is going to be 150 locomotives from GE, in a couple of years. That’s going to be the second largest fleet in Africa. Angola just signed a deal for 100 locomotives. We’re looking at Nigeria as really, with the new Administration coming in, as a reset button on building out rail infrastructure, and that could be very, very large, given the country and its needs.
Then places like Guinea, where the iron ore mine that’s going in there. That’s going to need a fair amount of locomotives as well, so I’d say from Tanzania, Kenya, all the way to the West, a lot of real activity going on around there.
That’s a good story, when a couple of those countries, or in fact three of the countries that you mentioned are very heavily dependent on oil – the oil price halving. Does that not affect their ambition?
I would argue that it has sharpened their view toward diversification. Without an adequate rail infrastructure, industrial development, economic activity is a fraction. A simple example, in South Africa, which is second largest GDP, has two thousand locomotives and runs, roughly, 20-plus percent of its freight on the rail. Nigeria, the largest GDP has 25 locomotives, and they run point-one percent on the rail.
If you look at the dynamics of Nigeria, a large agricultural producing capacity in the North. A large consumer base in the South. You need rail in order to move things reliably and timely, so I think, yes, oil is there but then you ask yourself ‘can I diversify into other things’ and rail really makes that possible.
What about the networks, the infrastructure itself, of those railroad lines. Are they expanding those as aggressively as the purchases of locomotives would suggest?
So I would say, for a place, again, like Nigeria you have quite an interesting network, and I use that term because there’s some areas that are dilapidated, just a long colonial era type track, but then there’s brand new, standard gage rail in some places.
They just did a renovation of about 1,300kms of track, from the North to the South, and you need to do that in order to facilitate the network, so there is investment in infrastructure, rehabilitation primarily. Angola, they just rehabilitated a 1,400kms towards DRC, so that’s going to provide capacity there. Mozambique is doing the same, so I think they are running side-by-side.
A really, good news story. What about the airlines side? GE has always been very involved there. Are you starting to assemble, locally manufacture on the Continent yet?
So the volumes that you need for assembly or manufacture, you know, that’s for the supply chain guys to make the decision on, and frankly, at this point, 200 or 300 engines really isn’t the manufacturing capacity. However, for Africa, we’re very close with Kenya Airways. They run the majority of their fleet with GE engines, or our GE leased aircraft.
Ethiopian Airlines, our partner there, we actually partner with them on the maintenance shop, so that ends up being a good… Then we’re looking south, we’re looking at the fleet renewal for a South African. We all think it’s time, and from experience across the Continent, and even the Middle East, our engines do very, very well in this environment, so we’re looking forward to when and if we become number one in South Africa, with GE aircraft engines.
Just to close off with, there’s often a perception that the multi-nationals come to Africa, sell product, pull profits out and don’t reinvest. You’ve got a different approach to the manufacturing or to helping grow the manufacturing base here.
I think it comes down to a commitment. To send somebody in, fly in every quarter is not that tough. However, if you are really committing to long term, then you need to do what it takes, and that is to establish facilities on the ground. It’s to train and develop local talent, to become leaders in the company, and deal with our customers on the ground, and its investment.
So across Africa, we’re going to invest, close to a billion Dollars in manufacturing facilities in Ethiopia, Mozambique, Angola, Nigeria, and then of course, here in South Africa. We’re putting a Customer Innovation Centre for the ‘high-tech’ here in South Africa. That should pull through about 100 engineers. In the last four years, we’ve gone after about $100m of investment from four countries, where we were strongly present, and now 16. In addition, we’ve gone from 800 employees to over/close to 2200 hitting – probably 3000 next year – and I think we’re rewarded for that. When you go from $1bn to $4bn in four years, I think that’s part of the success story.
Interesting story. Certainly bullish on South Africa and Africa, as a whole. Thomas Konditi runs the transportation side of GE on the Continent.
