African Business Review magazine - August 2016

August 2016 • w w w.africanbusinessreview.co.za

SPECIAL REPORTS:

Palabora Mining Company and Devtraco Ltd

Funding

KENYA’S FUTURE Dr Moses Ikiara, Managing Director of the Kenya Investment Authority, discusses its thriving economy

Build a

business strategy

that works

UPS

Delivering meds by drone

Business Banking

IN THIS ISSUE

EDITOR’S COMMENT

WELCOME TO AUGUST’S EDITION

of African Business Review. For our profile, we home in on Kenya’s investment opportunities. Cover figure Moses Ikiara chats to us about his organisation, The Kenyan Investment Authority, and what it is doing to boost funding in the country.

We then move across East Africa, and quiz UPS representative Esther Ndichu about transporting medicine to Rwanda.

By drone. Discover whether drones are the future of medical transportation, then join us to discuss strategy and execution with PwC’s Jorge Camarate. Finally, we travel to Singapore to explore the burgeoning relationship between the city-state and Africa.

We hope you enjoy this issue. We always welcome feedback via our social media channels… don’t hesitate to get in touch! @AfricaBizReview

Wedaeli Chibelushi Editor Wedaeli.chibelushi@bizclikmedia.com

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CONTENTS

06

F E AT U R E S

PROFILE

Funding Kenya’s healthcare

14

SPECIAL REPORT

22

Increasing connectivity

LIST

Pivotal The TECHNO LOGY long, slow death of offshore Sky high outsourcing

healthcare

4

AUGUST 2016

30

Five ways to close the gap between strategy and execution in Africa

C O M PA N Y P R O F I L E S

38

Palabora Mining Company MINING

58

Devtravo Ltd CONSTRUCTION

#1

PRIVATE BANKING SOLUTION

info@milessoft.com | www.milessoft.com

Miles Software is a software technology specialist in the Wealth Asset management and Portfolio management space. We offer suite of products leveraging technology innovation to accelerate Product innovation and improve operational efficiencies. Over 300 customers across 17 countries run their financial services business on the MoneyWareÂŽ platform.

India | South East Asia | Middle East | Africa | Europe

PROFILE

Funding Ken

Kenya’s economy is thriving. The Kenyan Inve by encouraging investment in the East Africa to Dr Moses Ikiara, Managing Director, to Writ ten by : W E D A

6

August 2016

nya’s future

estment Authority aims to bolster this growth an country. African Business Review speaks find out what the organisation’s plans are ELI CHIBELUSHI

7 7

PROFILE

ACCORDING TO THE World Bank, Kenya is among the fastest growing economies in Eastern Africa. Despite a global slowdown and plummet in commodities prices, Kenya’s economy is forecast to grow by six percent annually. Although these predictions are undoubtedbly bright, Kenya faces a notable challenge: low investment.

The Kenya Investment Authority (KenInvest) wants to overcome this problem. Founded in 2004, the agency works to foster a conducive 8

August 2016

investment climate in Kenya. To find out more about its plans, we spoke to Dr Moses Ikiara, Managing Director of KenInvest. Ikiara has held this position since 2013, and as such he’s led the authority’s recent progress. We chat with him to find out how KenInvest operates, and what its future plans are.

The basics As KenInvest provides a range of services (e.g. partnering with Kenyan businesses, issuing investment

F U N D I N G K E N YA’ S F U T U R E

certificates) it can be difficult to pinpoint the organisation’s core aim. Ikiara neatly summarises the organisations purpose for us: “The government agency provides investment information, project facilitation and after care services. We help investors establish and expand operations in Kenya, and find partners.”

KenIvest is also charged with coordinating domestic and international players engaged in private investment. The authority does this by maintaining a comprehensive, up-to-date record of Kenyan investment opportunities (both national and international).

KenInvest HQ is in Nairobi.

“However, we have sub-national offices in Eldoret, Kisumu and Mombasa. There are plans to increase these offices from three to 11”, Ikiara adds. “To connect with an international audience, our team of advisors frequently travel to key investment source markets such as the US, the UK, and Asia, in order to network at leading events and conferences.

Ultimately, they promote Kenya as a favourable investment destination.”

“The government agency provides investment information, project facilitation and after care services.

We help investors establish and expand operations in Kenya, and find partners” –D r Moses Ikiara, Managing Director, KenInvest

9

PROFILE

LAPSSET project Present projects KenInvest’s projects also demonstrate Kenya’s investment opportunities.

Ikiara tells us about LAPSSET project (the name refers to Lamu Port, South Sudan and Ethiopia Transport Corridor). “It is one of Kenya Vision 2030’s flagship projects and the country’s second transport corridor connecting to Ethiopia and South Sudan. It involves a port, three airport highways, railway lines, three resort cities and an oil pipeline,” Ikiara explains.

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August 2016

Konza City He also mentions Konza City, another major flagship development project. Konza City (otherwise known as Konza Technology City) is a multipurpose zone. It will include business process outsourcing (BPO) ventures, a science park, a convention centre, shopping malls, hotels, international schools and health facilities. It will be located in Makeuni County on a 5000-acre site, 64km south of Nairobi.

According to Ikiara, Konza City’s mission is to become “a sustainable, world-class technology hub and a

F U N D I N G K E N YA’ S F U T U R E

Galana-Kulalu irrigation project major economic driver for the nation”.

Ikiara has a B.Sc. in Agriculture and a PhD in Environmental and Natural Resource Economies. Thus, it’s apt that he’s overseeing one of the largest irrigation undertakings in East Africa.

The one million acre Galana-Kulalu irrigation project focuses on the production of crops, livestock and fish for domestic consumption and export.

As well as launching new projects, KenIvest works on continually improving its existing strategies.

“Moreover, we are constantly evolving

our investment policies to attract local, regional and international investors into Kenya”, Ikiara comments.

“Kenya has made marked strides in improving its regulatory framework. It recently enacted a New Companies Act, Insolvency Act and Business Regulation Act, in addition to the PPP Act of 2013 and on-going reforms to its Public Procurement Act”.

Furthermore, investors in EPZs are exempt from corporation tax for ten years following the date of the first sale (and a 25 percent rate 11

PROFILE for the next ten years). Ikiara adds: “There are a number of investment deduction opportunities including 100 percent of capital expenditure.”

The recently approved SZE Act provides further incentives for investors. “The preferential tax terms will include Value Added Tax (VAT) exemption on all supplies of goods and services to enterprises.

There will also be a reduction in corporate tax to 10 percent from 30 percent for a period of 10 years of operation and 15 percent for the next 10 years,” Ikiara comments.

KenInvest and co.

KenInvest balances multiple projects, but does so with a little help. “We work closely with ministries, Investment Promotion Agencies (IPAs), chambers of commerce from around the world, USAID, World Bank Group and other leading trade and investment bodies,” says Ikiara. “We recently worked with another key partner, UNCTAD, to launch Kenya’s first investment facilitation e-platform.”

Ikiara explains how KenIvest indirectly benefits other programmes: “Given the unprecedented global focus on Kenya, with major events such as President Obama’s Global Entrepreneurship Summit and our annual Kenya International Investment Conference (matched with on-going investor delegations from multiple global markets) we expect FDI growth to remain strong in the next 2-3 years.”

The future of KenInvest Ikiara believes that KenIvest, and Kenya, will continue on an upwards trajectory. “The country continues to roll out a series of measures to enhance the ease and cost of doing business. KenInvest is taking major steps, including the opening

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August 2016

F U N D I N G K E N YA’ S F U T U R E

“Our primary goal is to act as a bridge between investors and the market, offering continuous liaison…ultimately to make it easier to do business in Kenya” – Dr Moses Ikiara, Managing Director, KenInvest

of a one-stop-shop investor centre later this year in Nairobi, to build positive investor sentiment across the continent,” Ikiara explains. The one-stop-shop investor centre will ensure the end-to-end needs of investors are met in one place.

KenInvest also plans to develop major manufacturing projects in

Special Economic Zones (SEZs) and Export Processing Zones (EPZs).

KenInvest’s future plans are simple, yet ambitious. As Ikiara summarises: “Our primary goal is to act as a bridge between investors and the market, offering continuous liaison…ultimately to make it easier to do business in Kenya.”

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Sky high hea

Very soon, UPS will be transporting medicatio UPS representative Esther Ndichu tells Africa the project, including the company’s partners Wr itten by: Wedael i C h i belu sh i

althcare

on across Rwanda by drone. an Business Review about ship with Zipline and Gavi

TECHNOLOGY UPS HAS A reputation. It’s the world’s largest parcel service, a global leader in logistics, serves over 220 countries, employs over 444,000 people and delivers 18.3 million packages a day.

Anyone would be forgiven for classing UPS as a corporate behemoth.

However, The UPS Foundation defies this perception. Founded in 1951, the group leads global citizenship projects. For instance, 2015 saw UPS providing relief during the Nepal Earthquake, the Ebola crisis and the refugee crisis. This year, UPS is collaborating with Gavi (a global health partnership) and Zipline (a robotics company) to transport life-saving medicine via drone. The partnership is exploring how vital medicines, e.g. blood and vaccines, can be delivered to communities in rural Rwanda.

African Business Review spoke to Esther Ndichu, Vice President of Public Affairs in the Middle East and Africa, to find out more.

Tell us a bit about yourself and how you came to work for UPS. I’ve been at UPS for 11 years. I’m currently the Public Affairs Director and I’m responsible for all our public affairs activities within the Indian 15

TECHNOLOGY sub-continent, Middle East and Africa.

When I joined the company I worked in different roles, from engineering to revenue management and my most recent role was Manager and Supply Chain Director supporting the UPS Foundation, based out of Brussels.

So this topic is one that is close to my heart, because I was involved in forming the Gavi partnership and we explored how our coverage in the humanitarian relief programme could help, from just the basic humanitarian and disaster response work and resilient work, and venturing more into what I call the public health arena. So, that’s me in a nutshell. I’m originally from Kenya but I’ve lived in the States. I went to school in Ohio, then lived in the States for a few years… a few meaning many [laughs].

Yeah, that’s me! That’s who I am.

How did the partnership between UPS Foundation, Zipline and Gavi come to be?

Okay, so we’ve had a partnership with Gavi for the last two-three years and our work with them has expanded from looking at their supply chain. We’ve had a couple of people that have been seconded on a special assignment at 16

August 2016

Gavi, looking at various parts of their supply chain and trying to figure out what UPS as a logistics provider could do for them. So that discussion was going on, and we had this one guy that was there for a while. On a flipside to that, UPS is constantly looking for forms of technology to improve the way we operate. We’ve been looking at drone technology and we had a conversation with Zipline. Once we took the conversation to the next level, which is more than just “Hey! Tell us what you guys can do!” to “Hey! How can we work with you?” It became very clear that bringing Gavi into the conversation would be the next natural fit - they’ve got innovation as one of their key pillars. When they look at trying to go to the next level of their supply chain, or taking their supply chain to the next level, innovation is one of the pillars we’re looking at, so it was a natural fit. We bought the three folks to the table. Zipline had been talking to the government of Rwanda already about what possibilities there are too.

You’ve touched on how UPS contributes to the partnership, but it would be useful if could you tell us a bit more…

S K Y H I G H H E A LT H C A R E

Through a partnership with the Government of Rwanda, Zipline will deliver all blood products for twenty hospitals and health centers starting this summer, improving access to healthcare for millions of Rwandans.

“Gavi is... the leading organisation responsible for delivering vaccines to 70 of the poorest countries in the world. With that comes a lot of power�

17

TECHNOLOGY

From UPS’ perspective, we’re coming in providing logistics expertise. We’ve got some folks who have been looking at drone technology internally, so from that perspective we’re coming in with the knowledge of what’s been done and what are the challenges. But then we also came in with money, as you can imagine this is an expensive endeavour. We came in with a $800,000 commitment to help this project in Rwanda. Zipline is bringing all the knowledge, the technology, the back end work. Keller Rinaudo, who’s the CEO of Zipline has dedicated his short life - he’s not an old guy [laughs].

He’s dedicated his professional life to 18

August 2016

looking at different kinds of robotics and how they work, how they can be implemented. With Gavi, we do realise that delivering vaccines is a problem, so we start looking at delivering vaccines into remote areas, rural parts of the world where that’s been a challenge for them so that they can get 100 percent coverage in a lot of countries. They had a need, but then they were also able to give to us, coming from an expertise of what is needed from a health perspective.

Some readers may be wondering why the world’s largest package delivery service is partnering with

S K Y H I G H H E A LT H C A R E

two relatively unknown companies.

Are there benefits to working with smaller organisations?

I think for us it’s just making sure that their synergies are what we’re looking for. In this case, Zipline had a good product, they had a product that was able to meet a need we hadn’t been able to find in the market at the time. In addition to that, we find that it’s a niche company, right? So they’re focusing on robotics, they’re able to be more focused, it’s easier for us to engage with a specific group. For us, we’ve been looking for a way to expand our healthcare product and our health care offering, so we realise that smaller folks were able to give us a more focused and concentrated effort. Actually, Gavi is not a small player. It’s is the leading organisation responsible for delivering vaccines to 70 of the poorest countries in the world. With that comes a lot of power. They’ve got a lot of pharma companies backing them up.

Can you tell me about the technology behind the drone?

So, Zipline is responsible for developing the robotics behind it. You have to be able to come up with a system that’s sustainable and easy to be

deployed. Looking at the system that we currently have, they operate with a hub concept, so their hub holds about 15 different “birds”, or drones. When we first started this project the analogy we used was a nest with some birds.

The nest is a hub, and the hub has multiple birds or drones. The drone is able to cover a range of I think 25 km.

It should be able to carry one or 1.5 kilos worth of vaccines or product.

Also, we use passive packaging, plastic packaging which is able to maintain the temperature of the vaccine.

The hub is typically associated with a specific area you’re looking at, maybe a district hospital or what would be considered a district medical centre which, is the same as a warehouse with designated health clinics or designated health centres. They would be getting the product from that facility. Zipline will set up each location with a mailbox. Then, using mobile technology the health clinic is able to place the order to the medical centre.

Once that order is received, they’re able to fulfil it. What makes this concept so cool is since the hub is so close to a medical centre, you are coming from an area that’s already temperature controlled. You really are able to reduce 19

TECHNOLOGY

“In the case of Rwanda, the government has taken a stand – they want to be at the forefront, they want to be the innovation hub for East Africa, and I think Africa as a whole” 20

August 2016

S K Y H I G H H E A LT H C A R E

the exposure of the vaccine, or in the case of Rwanda, reduce the exposure of the blood to slight temperature differences, right? I think the maximum delivery time we’ve talked about is 45 minutes. When the drone departs (the health worker already knows because they placed an order) they’ll receive notification that it has departed. Two minutes before it arrives they’ll receive another to tell them that the drone is already two minutes away. It comes in, drops the product off at a chute, turns around goes back to the hub.

Are there plans to expand the service to other countries?

Yes, the whole Rwanda product came in at the right time - as I said, some of the discussions had already started.

We see ourselves being successful in any other country that faces the same challenges that Rwanda already has. The first phase of the project is to look at blood delivery and then expand to rabies vaccines, because rabies is a very high killer in Rwanda.

Ultimately, if we’re able to succeed we do have several other countries that have expressed an interest.

This is definitely not a one-off project. Amazon, Walmart and

Dominos have shown interest in sending goods via drone. Is drone delivery the future?

There’s a lot of interest, everybody is expanding and looking for ways to operate efficiently. So I think so. It’s just a case of how fast governments are able to respond to the legislators or the legislation that’s required to have drones flying around. In the case of Rwanda, the government has taken a stand – they want to be at the forefront, they want to be the innovation hub for East Africa, and I think Africa as a whole. So with that, that means they have rules and laws in place that have made it easy for us to practices. So it’s just a question of how other governments respond and come up with rules to allow many birds to be flying around [laughs].

When will the project officially begin?

The drones land in July, they get to Rwanda in July, then they start testing in the summer, and we see ourselves being there for at least 12 months.

It’s about the KPIs, it’s about being able to come up with something sustainable. It’s about having enough data to determine success.

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SPECIAL REPORT

Increasing

connectivity W r i t t e n b y : N Y E LO N G M A N

SPECIAL REPORT

African Business Review explores business links between Singapore and Africa, and speaks to a number of ministers and business leaders WHILE AFRICAN COUNTRIES only account for around 1.5 percent of Singapore’s total trade, the citystate is keen to ramp up its business with the continent. Businesspeople and ministers from both countries are realising more than ever that there are a number of opportunities to do business and develop both large and small projects. Following a meeting exploring trade links and opportunities between Africa and Singapore, African Business Review explores the current landscape, as well as what the future may hold.

Singapore: a model for African nations?

If you ever get the chance to take in the view from the restaurant atop Singapore’s historic city hall, you’ll be presented with an abridged history of the island nation. Emerging 24

August 2016

onto the roof from the country’s National Gallery, you’ll inevitably notice the sprawl of the Victorian cricket pitch and, beyond, the preeminent Marina Bay Sands – the world’s most expensive standalone casino. Pan right and you’ll see an impressive skyline where the towers of multinational companies dwarf the modest clubhouse below.

The story of Singapore’s rise from colonial trading outpost to first world Asian Tiger economy is well known and is told and re-told by everyone from cab drivers to Government Ministers. Dr Mohamad Maliki Osman, Senior Minister for Defence and Foreign Affairs says: “That’s the perspective of Singapore – we are friends with everyone and continue to build relationships.

“We have had a short period - by many countries’ standards – as far

INCREASING CONNECTIVITY

“Solutions that take into account the socioeconomic and political situation on the ground will ultimately be the most effective – not to mention the most profitable”

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SPECIAL REPORT

of our life span. Less than 50 years of independence. But 50 years of intense experience, starting from a low base, we would like to share.”

Singapore has developed solutions to issues that African nations have been facing for decades – housing, water, infrastructure and governance. There is an increasing number of Singaporean companies on the African continent working with both governments and local partners in order to begin solving these complex issues.

Much of the continent’s needs are similar those facing Singapore 50 years ago, but solutions that take into account the socioeconomic and political situation on the ground will ultimately be the most effective – not to mention the most profitable.

Dr Koh Poh Koon, Minister of State for National Development explains: “Some countries want to build high-tech industrial parks because they’re captured by the notion of high technology, but you’ve got to ask yourself if you’ve got the workforce for that. You cannot go on the same bandwagon as someone else in a different phase of development.”

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August 2016

Singapore’s top African trading partners 1) Liberia 2) South Africa 3) Egypt 4) Angola 5) Togo Total export value: s$8 billion Total import value: s$3 billion

African companies in Singapore The World Economic Forum’s Global Competitiveness Report listed Singapore as the world’s second most competitive country.

Furthermore, the World Bank also named the country as the easiest place in the world to do business for 2015 - INSEAD’S Global Innovation Index 2015 also ranked it as the most innovative country in Asia. But a company choosing to headquarter

INCREASING CONNECTIVITY

Top 5 Singaporean exports to Africa

Top 5 African exports to Singapore

1) Petroleum Oils 2) S hipping and Floating Structures 3) E lectronic Integrated Circuits and Microassembles 4) Plant and Equipment 5) T elecommunication eqip.

1) Petroleum Oils 2) E lectronic Integrated Circuits & Microassembles 3) Cocoa 4) Fruits and Nuts 5) Pearls and precious stones

Total value: s$8.4 billion (2015)

Total value: s$2.6 billion (2015)

there gains more than the business environment; Singapore’s location positions companies to trade and operate with the economic powerhouses of India and China, not to mention both the growing and established markets in Eastern Asia.

One example of a business recently engaged in this process is Adcorp – one of Africa’s largest workforce management companies.

Two years ago, the company

supported its regional expansion plans by headquartering all of its non-South Africa activities in Singapore and is looking to increase the depth of this presence.

Executive Director and CEO for International, Amitava Guharoy, says: “There are lots of advantages.

Singapore is now ranked third as a leading financial centre in the world. There’s a very strong community of people financing 27

SPECIAL REPORT

Africa-Singapore Business Forum 24-25 August 2016

international expansions – one of the first impressions was the ability to raise finance.

“The Government and its entities have been very supportive of our plans. We see this as a long term exercise – not just for short term benefits. There’s a strong business proposition to have our HQ here.

When I told my group CEO when he asked me how long it took to set up a corporate entity, I told him three days would be considered a long time - he nearly fell off his chair!”

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August 2016

Since 2010, IE Singapore has been hosting the Africa Singapore Business Forum (ASBF) as a unique platform to further develop investment, trade and thought exchange between Africa and Asia.

ASBF 2016 will tackle critical issues and will highlight opportunities for the strategic growth of both regions through presentations, panel discussions, and networking. www.iesingapore.gov.sg/asbf

INCREASING CONNECTIVITY

Singaporean companies in Africa Africa presents the last investment frontier for many companies across the world. With expertise spanning oil and gas, logistics and manufacturing, as well as clean urban and infrastructure planning, Singaporean companies are naturally well-placed to find a range of opportunities on the continent.

While some African countries compare relatively favourably with more developed Western economies, a number of logistics challenges are present and are set to continue until infrastructure projects are delivered and political situations stabilise. None more pressing is the continent’s infrastructure gap which could cost as much as $90 billion a year for the next decade in order to address. Other industries face similar long term challenges but innovative solutions are afoot to combat the doom and gloom.

Ascent Solutions, for example, specialises in producing IoT technology for the logistics industry and for cargo security tracking. Its iSPOT™ solution provides continuous location, security and sensor-based tracking that not only helps to prevent cargo theft, but also reduces customs administration time and costs.

There are also cases where the growth of African economies is creating new areas of demand that Singapore-based companies are keen to fulfil. Recognising Africa’s growing affluent class, Star Publishing has found a new market in South Africa’s Free State, where it is delivering a range of hard copy and digital classroom materials to private sector schools. Singapore’s Institute for Technical Education is working on a number of vocational education projects across the continent.

The conditions in parts of Africa now and Singapore 50 years ago are clearly different, but the comparison does highlight what still must be done. Upholding the rule of law and developing a solid regulatory and governance body will go a long way to assure businesses that their assets and investments will be safe – a point Osman is also keen to stress. The value of a local presence supported, where possible, by local partners, is key. Given the sound business climate in Singapore, the fact that a number of companies from the nation state have chosen Africa as a place to do business should be an inspiration to others across the world.

29

LIST

How to close t strategy and e Strategy specialist Jorge Camarate gives African Business Review his five steps to going from business plan to business success Written by: Wedaeli Chibelushi

the gap between execution in Africa YOU’VE EXPANDED YOUR business in Africa. You’ve produced a watertight strategy.

But how do you secure continentwide success? This question remains largely unanswered the among those growing businesses in Africa. According to Strategy& (PwC’s strategy consulting company) as many as 66 percent of business expansions into Africa resulted in negative shareholder returns.

To find the answers, African Business Review quizzed strategy specialist Jorge Camarate.

Camarate is Partner at Strategy&.

He has spent 12 years consulting across the globe, but has now settled in Johannesburg to advise clients in business strategy.

As part of his role, Camarate gives firms tips on how to bridge the strategy-to-execution gap in Africa. We ask him to share his guidelines with us.

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LIST

1

Acknowledge that Africa is not a country Rather, Africa is made up of 54 diverse countries. According to Camarate, many large Western companies fail to recognise this, instead viewing Africa as a homogenous hub. This perception is “quite prevalent, especially if you talk to companies outside Africa, like multinationals in Europe, the States, or Asia”, Camarate explains.

“There are multiple realities that people struggle to understand, like how different two countries can be and the slight nuances that can make a business either very successful or impossible to grow.”

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HOW TO CLOSE THE GAP BETWEEN STRATEGY AND EXECUTION IN AFRICA

2

Watch out for cultural differences Different African regions have different cultures. Camarate explains how this should affect business decisions. “I’ll give you an example that I find quite interesting,” he says. “Funeral insurance or funeral plans are very popular in parts of the continent - they’re extremely popular here in South Africa. There are certain societies within Africa where it’s taboo to talk about them and there’s certain societies where you can talk openly about that, where people find importance and a moral imperative to make sure that funeral costs are covered, because they don’t want to pass on any debt to their offspring. In these countries, funeral plans are extremely popular. In countries where you can’t talk about death, it’s impossible to sell the product.

There are societies where talking about death means inviting death. So although two countries may look very similar, they have a slight cultural nuance that might make products either easy or difficult to sell.”

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3

LIST

Capitalise on your capabilities What are your business’s strengths? Identify them, build on them and gain the ones that you don’t have. Camarate uses South African financial services company Sanlam to demonstrate this process. He tells us Sanlam’s capabilities are risk, actuarial, and capital management. When expanding from South Africa into wider Africa, Sanlam didn’t have “low cost distribution channels, the knowledge of customers from low income levels and how you build these simple, straightforward products that need local nuances”, Camarate says. In order to fill this void, Sanlam “looked for partners and acquisition targets who investigated their access to the local population that they needed”.

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HOW TO CLOSE THE GAP BETWEEN STRATEGY AND EXECUTION IN AFRICA

4

Take your time when securing deals “There’s always this perception (especially a couple of years ago) about Africa: that you need to secure a deal at any cost.” Camarate explains how Sanlam bucks this trend, thus providing another lesson. “They always took the view that they should invest the time in due diligence, and the minimum time it took for them to secure a deal or secure a partnership was a year and a half. So they invest their time, do a lot of due diligence and they even invite the management team of the companies they acquire or partner with to come to their office. They invite them to understand how they operate and build that relationship.” Can’t Sanlam lose deals by not acting fast enough? “It’s better to invest and let many deals fail, and for the few deals that come through to be the right deals,” Camarate explains.

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LIST

5

Source some local talent According to Camarate, local talent pools are remarkable, yet shallow.

But that doesn’t mean that foreign businesses must rely on expat talent when expanding into Africa. If you search for local talent in universities or try to poach from competitors, you won’t find a substantial amount of potential employees. “Ultimately, you must do a combination of both,” Camarate advises.

Developing this talent will also yield results, e.g. providing graduates with training. He also recommends sourcing staff from the African diaspora, of whom some are looking to return from the West to Africa. “They’re now trained and have a Western mind set and a work ethic that be extremely useful,” says Camarate.

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HOW TO CLOSE THE GAP BETWEEN STRATEGY AND EXECUTION INX X AFRICA XXXX

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D o

Deep at the heart of Limpopo

Written by John O’Hanlon Produced by Glen White

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August 2016

MINING

For one of the poorest areas in South Africa, Palabora Mining Company (PMC) is a lifeline. Faced with closure in recent years it is now secured for the next two decades – and is working to leave a positive legacy for much longer

T

he great Palabora copper mine could well be history by now. At the time of the global financial crisis in 2008, the implementation of an expansion plan to extend the mine’s life for a further 20 years was in doubt. The high copper volumes obtained from the original open cast mine, which created the ‘biggest hole in South Africa’ having been largely exhausted, and the ‘Lift I’ underground mine, whose production capacity reached 30,000 tonnes of ore per day, was nearing the end of its life. A number of years later Palabora’s other main product, iron ore in the form of magnetite, was also in decline as world mineral prices plummeted.

The simple fact that today Nick

Fouché is in his position as General Manager for Growth and Major Projects Delivery at Palabora Mining Company (PMC) shows that this situation has changed radically.

In 2011 Fouché was working in Salt Lake City with the Capital Projects Group of the mine’s then principal shareholder Rio Tinto when he was asked to lead an ‘order of magnitude’ study at Palabora as part of a process to determine whether the massive investment that would be needed to open up a deep mine below the one we have mentioned, would be feasible.

“Because we had good drill results and good modelling from previous years we were able to run that study in a nine months as opposed to the couple of years it would normally

w w w. p a l a b o r a . c o m

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What the company does Francks Engineering specialises in hydraulic cylinders and line boring whether it is at our workshop or in the field. We also do turning and milling of specialised parts.

Contact us francks@mweb.co.za info@francksengineering.co.za Tel nr : 087 630 0288 Mobile : 083 282 7386 / 084 811 3672 Nr 5 Second St, Extension 5, Phalaborwa

Who we are Francks Engineering was founded

by Ockie Franck in 1999 just outside Phalaborwa and initially started out as a general engineering business, the focus of the company quickly shifted when the decision was made to specialise in hydraulic cylinders and line boring.

Francks Engineering does not only offer the best quality and pricing but also the best possible service available. We pride ourselves in our turn around times and delivery schedules.

The company has since grown significantly due to our good name, service and warranties. With more than 45 years experience in the engineering industry you can be assured about the level of workmanship and quality provided by Francks Engineering.

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take,” he says. Time was of the essence, because the new mine, Lift II, needed to take up production and human capacity seamlessly as Lift I declined. Palabora is Southern Africa’s only producer of copper rod and many local industries like cable manufacturers depend on it for their supply. A hard stop on one followed by a hard start on the new mine would have made no economic sense.

Rio Tinto decided following a feasibility study that the proposed mine would be viable and backed

“This kind of initiative really energised the project: we are doing things here that are pushing the boundaries of conventional mining!”

– Nick Fouché, GM, Growth and Major Projects

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the initial investment to construct the declines that would connect the Lift I and Lift II ore bodies.

“We started those ramps in early 2012,” Fouché explains. “At that stage we realised we would have to optimise the design. If the upfront capital requirement was too high the grade of our reserve would not support it. We had to leverage the existing shaft infrastructure, and build a second bock cave under the existing one, connect them all up and still make a positive business case

MINING

out of it!” They decided on a twin-decline ramp system to connect the ore bodies. One decline is for people and supplies, the other is a conveyor decline each 3.6 kilometres in length.

Pushing the boundaries

The key requirement was to get the tunnels advanced quickly. “We started rather late, so we called for a 10.5 metre daily advance on two faces, though most contractors wouldn’t commit to more than seven.” The challenge was taken up by the Australian contractor Byrnecut, which managed to achieve this unprecedented

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advance rate, at the same time as training a local workforce in the skills needed for high speed mechanised development. An innovative contract was devised to spread the risk between owner and contractor in recognition of the uncertainties of the project and the fact that the advance rate was at the threshold of previous mining practice. It still couldn’t have been done without the deployment of a massive 21 tonne LHD. “We lowered the machine using our existing shaft infrastructure, and that is the

biggest piece of mobile equipment that has been lowered in a shaft in Africa,” recalls Nick Fouché. “We had to do some clever engineering.

We built a special skeleton for the machine so that we could stay within the loading limits of our winder. This kind of initiative really energised the project: we are doing things here that are pushing the boundaries of conventional mining.”

An additional uncertainty was injected in 2013 when Rio Tinto withdrew from Palabora and PMC was acquired by a consortium

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led by the Industrial Development Corporation (IDC) of South Africa Limited and China’s Hebei Iron & Steel Group. The investment case had to be sold to the new shareholders. The fact that much of the infrastructure was in place impressed the new shareholders and they supported the Lift II project despite the fact that their primary interest had been the magnetite, of which there was a 250 million tonne stockpile at the mine.

In November 2014 the board approved the Lift II investment programme of more than a billion

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dollars says Fouché : “We took the view that though prices were depressed we had enough financial carry to cover a lot of the upfront work from our own balance sheet, and went to the market for some of the funding.” At the same time, with the copper price on the floor contraction set in among other copper projects as some were shelved, mothballed or abandoned.

“We have taken a positive view of the long term copper price.

The supply and demand position projected post 2020 indicates that copper prices would potentially be

“We had to leverage the existing shaft infrastructure, and build a second bock cave under the existing one, connect them all up and still make a positive business case out of it!”

MINING

– Nick Fouché

on the rise. To develop an underground copper mine takes many years,” he adds. Four years from now PMC may face competitive supply in an improving world minerals environment.

Cutting the cloth But copper prices are still low and Palabora needs to guard its margins. One way it is doing this is by taking out cost and using local contractors where possible.

Byrnecut was successful but cost was dollar based and potential existed for a lower cost approach, so in March it was decided to change to a small South African company Mvuso which would have a lower cost base.

“The goal was to share our knowledge and help them to reach a competitive mining rate. We have a lot of in-house expertise: we have been tunnelling with Byrnecut for more

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MINING

than three years, and we have been running a block cave for 15 years after all. Reconfiguring and repricing the tunnelling work has taken out hundreds of million’s of Rand,” he says, and the move has been justified since the local contractor has added 2.5 kilometres to the tunnels and has reached the access point to the undercut, from which the ore will flow.

The focus now is on ventilation.

To connect the Lift I and Lift II ventilation systems PMC has sunk two 450-metre shafts, 4.5 metres in diameter. The contractor, Murray & Roberts will then connect the undercut and production levels with a number of raisebores. That’s going smoothly, however the twin ventilation shafts being sunk from the surface present a real challenge. The contractor Master Drilling is once again approaching the limits of mining capability: the company designed and built the RD8 raiseboring machine specifically for the PMC project, which entails the construction of

two 6.1-m-diameter ventilation shafts, each with a recordbreaking depth of 1.2 kilometres.

The RD8 machine operates faster and is significantly cheaper than the conventional blind-sinking technologies, and requires only two operators per shift. But raiseboring has never been tried at this depth and diameter in combination. “The driver for us is that we were looking to maximise the vent requirement without doing multiple holes: the bigger you go the lower the cost is a theme running throughout the project. We need to stay in the cost envelope and engineer accordingly.”

The traditional approach to project management is that the owner’s team oversees the EPCM and the EPCM oversees the contractors. On Lift II it made sense to leverage the expertise of the people who had been involved in Lift I construction – after all they are very similar in design.

Accordingly, Fouché and his team have worked out a more integrated management approach with the

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We are Mining & Plant Specialists RSV is a leading engineering and project management group of companies serving the mining, metallurgical and industrial markets.

We have extensive experience in the design and operation of the entire spectrum of mining activities – from exploration through to full production – covering all aspects of access to the ore-body.

www.rsv.co.za / rsv@rsv.co.za “We are proud to be associated with Palabora Mining Company”

MINING

EPCM contractor RSV (Reid Swatman & Voigt).

“It saves us a lot of money and the teams I manage are so much more positive since there are no shadow roles. Decision making is quicker, team dynamics are better – we do things together and there’s no ‘them and us’ blame culture.”

Special cases The 40 year old process plant at Palabora has become more costly and inefficient, so it’s being replaced. “We are building a brand new flotation plant with just 14 major float cells (the current plant has around 78 float cells), so you already get huge economies of scale on energy, pumps, maintenance and other things. The new plant will be The year that Palabora volumtrically more substantial, which means Mining Company more recovery time and improved recoveries. was founded We will push recoveries up from around 83 percent to 88 or 89 percent,” explains Fouché. The plant is under construction by Beijing General Research Institute for Mining and Metallurgy (BGRIMM), which is fast becoming a major player in Africa. Another major project he is overseeing is an ore sorter to remove granite content which can linger in the autogenous mills, taking up space that should be filled with ore and reducing throughput But by far the largest upgrade will be the smelter which produces copper rod for the domestic market. It was built to cater for the original open cast operation which produced 80,000 tonnes

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“I set a vision for the project: when we leave we must leave something substantial behind” – Nick Fouché

per annum (tpa) of pure copper from a throughput of up to 120,000 tonnes per day (tpd) of ore. The present day operation produces about 41,000 tpa from 3,000 tpd.

“The size of the furnace does not match our production footprint, and that means huge inefficiencies through heat loss and a very costly downstream process,” he says.

The smelter is being retrofitted at a total cost of $55 million, the entire furnace is being replaced and new technology introduced throughout, it will be effectively a new smelter. At the time of writing

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the project was still under tender.

As mentioned earlier PMC is not a pure play copper producer. The magnetite circuit, upgraded last year with the purchase of a new separation plant and a drying plant that can handle six million tpa adding a price premium of five to eight dollars a tonne to the product, is of immense importance to the company. This revenue goes a long way to fund the Lift II project, says Fouché “Now that everyone is struggling with iron ore, it is the ones with the low grade that are falling out of the market. We are in a good position to continue to produce

MINING

iron ore to supply foreign markets.”

A future for Phalaborwa With so many major projects to oversee it is a miracle that Nick Fouché has time for anything else, but he retains his passion for PMC’s sustainability agenda. Thanks to Lift II the mine will still be here till 2033, maybe a little longer, but it will run out one day and PMC’s responsibility will not end there. “I set a vision for the project: when we leave we must leave something substantial behind more than just a mine. I want to see new contractor

companies that are sustainable going forward and can be part of the mining economy.” We want the project to contribute to the transformation agenda of the country and the region, encouraging and supporting previously disadvantaged groups to be long term sustainable suppliers to our industry. In addition to this we want the existing Palabora Foundation which has been a flagship in the mining industry, he adds to be able to continue its good work in its support to our community and the sustainability of our business.

It supports many initiatives in

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our community from small scale farming to harvesting amarula, a tree found only here and from which liqueur and cosmetics are made.

It also runs after-school programmes for AIDS orphaned children, clinics and job creation schemes as well as supporting supplier development start-ups. We have started a process where many small construction companies in the district, whose expertise was limited to small dwellings and community buildings, have been invited on to the mine and given small surface projects and then in collaboration

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with larger contractors they are brought underground to construct sub-stations and the like. “As a result of this process we have spent large sums of money on contracts for black-owned and women-owned enterprises,â€? says FouchĂŠ. My hope is that these contractors will reach a point where they are tendering across multiple mines and industries not only in Palabhorwa but across the country.

Another form of contribution towards sustainability has been to contractually define the hiring policy of semi skilled and unskilled labour. For the last two years it

MINING

“We had to leverage the existing shaft infrastructure, and build a second bock cave under the existing one, connect them all up and still make a positive business case out of it!”

– Nick Fouché

has been a condition of any contract at the Lift II project that all unskilled and 80 percent semi-skilled labour is sourced from the Ba-Phalaborwa district’s of 150,000 population. It’s a policy with real impact in a region with upward of 50 percent unemployment. I think that is one project that has found real traction,” he concludes.

“I am proud of what we have done with the magnetite upgrade, the Lift II construction, the downstream plant and the communities.

Palabora is a flagship in southern Africa.”

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Building for G

Ghana

Written by Tom Wadlow Produced by Richard Deane

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D E V T R A C O LT D

Middle income and affordable housing developer Devtraco is helping to address the huge demand for housing in the country, work which has secured its status as a Ghanaian Superbrand

G

hana’s demand for housing is tremendously high. “Some 1.7 million units are needed,” reveals Joseph Aidoo, Managing Director of real estate developer Devtraco.

With the company having spent the past 23 years developing thousands of middle income and affordable housing for Ghanaian citizens, Aidoo is following in his father’s footsteps after joining the family business on completion of his master’s degree.

The business has grown to a 500-strong workforce with assets of $70 million, making it one of

the most prominent real estate operators in the country, especially in the Greater-Accra Region where it is currently working on several highly ambitious projects.

From building homes to buy and rent to providing estate management services and sales of serviced plots, close collaboration with clients has facilitated the rise of Devtraco to official Superbrand status.

City of Hope Not only is Devtraco providing a mix of essential affordable housing and higher end properties, but also

“That we are able t is cr

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CONSTRUCTION

an extremely sound investment proposition. On average, Devtraco houses and apartments appreciate a massive 20 percent each year.

The average annual rental yield is between eight and 10 percent, allowing investors to make a decent return within just a few years.

Its current flagship project in Greater-Accra is the City of Hope, as Aidoo explains: “This is a $120 million, 1,500 home development and we have built 1,100 since the project commenced in 2009 – we anticipate

it will be completed by 2018.

“We have already built a police station, a fire station and we will also be building a 6,000 square metre mall as well as a school and recreational areas. That we are able to leave a positive legacy behind for the community is critical in order to achieve a sustainable community.

You can’t have a sustainable community without these amenities so it’s important to provide facilities for our clients and homebuyers.”

Just three kilometres away from

to leave a positive legacy behind for the community ritical in order to achieve a sustainable community” – Joseph Aidoo, Managing Director

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D E V T R A C O LT D

“Because we have managed to set ourselves apart, we have found that human resource has come to us, which has helped us a lot” – Joseph Aidoo, Managing Director

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the City of Hope lies a 1,800 acre developer in Ghana to hold such a site which Devtraco is planning to title, and sits alongside thousands transform into another residential of reputable household names from and commercial community hub. around the world. Superbrands Many Devtraco developments was established in 1994 and is sell out in almost no time, with now established in 88 countries would-be homeowners having to around the world, making it an apply to purchase a property. Once important recognition for Devtraco successful, there are two financing and a valuable marketing tool. options – either self“Being named a Super financing by paying in Brand means a huge instalments during the amount to Devtraco,” construction process, Aidoo says. “We went or arrangements about receiving it simply with mortgage by serving and listening to providers. Devtraco our clients – it’s a big deal The year that has partnered with and another testament to Devtraco Ghana Home Loans, our commitment to our was founded Home Finance clients and homebuyers.”

Company, Fidelity Aidoo also explains Bank and Stanbic Bank to help how establishing a reputation for customers find an affordable means excellence has aided Devtraco’s of paying for their property. recruitment process, which has successfully brought hundreds of Super brand permanent and part time staff on In 2012, Devtraco attained board. “Because we have managed Superbrand status in Ghana’s to set ourselves apart, we have found inaugural Superbrands Awards. that human resource has come to us, It remains the only real estate which has helped us a lot,” he adds.

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Forward thinking An important factor in being able to deliver cost-effective homes for working Ghanaians is the ability for Devtraco’s own costs to be kept in check.

Through work with several partners and trials of many different products, new construction technology is being used to keep housing as affordable as possible. For example, the company is looking at new pre-cast concrete solutions which could be in place by next year.

Aidoo has an ambitious vision for the next decade. In fact, it is a drive towards the same goal established when the company formed 23 years ago – to become the number one real estate company in Ghana.

The number of He concludes: “In the next 10 employees working years I want us to truly establish for Devtraco ourselves and become the number one provider of middle income-affordable housing in Ghana and the sub region. We want to work with more partners/suppliers who excel in their fields and will continue to choose carefully the best possible companies to do business with.”

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