July 2010 emea

Businessexcellence ACHIEVING

JULY 2010

O N L I N E

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than Better the

original Replica cars are being taken to a new level by South Africa’s Hi-Tech Automotive

Editor’s letter

EDITORIAL

Editor In Chief Martin Ashcroft mashcroft@bus-ex.com Managing Editor Becky Done bdone@bus-ex.com

DESIGN

Production/Creative Director Zachary Smith zsmith@bus-ex.com Production Designer Mallory Lindsley mlindsley@bus-ex.com

BUSINESS

Director of Editorial Research Scott Mason smason@bus-ex.com Director of Sales Sean Brett sbrett@bus-ex.com Assistant Research Directors Vincent Kielty vincent@bus-ex.com Sam Howard showard@bus-ex.com Richard Halfhide rhalfhide@bus-ex.com Robert Hodgson rhodgson@bus-ex.com Administration & Operations Alice Doran adoran@bus-ex.com Chief Executive Andy Turner info@bus-ex.com

Act

boldy

So the World Cup has begun; and as any sportsperson will tell you, success during competition often boils down to having the courage of your convictions. It is frequently the same way in business, when taking that one bold action—and worrying about the intricate details later—ultimately pays off.

Sometimes, the best results are achieved simply by following your instincts.

For Arnold Vermaak, CEO of South Africabased Afripack, acquiring the flexible packaging division of Astrapak was not necessarily part of the game plan. “We were not looking for something the size of the Astrapak division, which included a total of five companies, but it was too good an opportunity to pass over,” he explains. That R184 million decision paid off, however, effectively doubling Afripack’s turnover overnight and creating a powerful new contender in South Africa’s R11 billion per annum flexible packaging industry.

For Jim Price, managing director of Port Elizabeth, South Africa-based HiTech Automotive, making the leap from construction into the automotive world wasn’t the most obvious of moves. “I worked in construction all my life,” he says, “and was attracted by the glamour of cars and their contrast with what I was doing. But it didn’t take long to discover that as fast as I put money into the business, it was haemorrhaging out the other end.” The story ends happily, however—Price has successfully steered the company through that challenging initial period to a point where it now employs 220 people producing iconic replica cars in 20,000 square metres of factory space.

Acting boldly should not be confused with acting impulsively, however. Just as in a football match, the latter can have disastrous consequences, while the former can make that all-important difference between winning and losing.

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20 CUSTOMER FOCUS: Be inspired The Ritz-Carlton Hotel at Palm Beach, Florida, is a unique destination that promises to leave a lasting impression.

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STRATEGIC MANAGEMENT: An engaging approach Failure to manage the upheaval to staff that often follows a merger or acquisition can come at a cost.

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INFRASTRUCTURE: Consider the clouds Making the move to cloud computing can raise a number of questions that should be given careful consideration.

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Afripack Pty Ltd From sack to pack This company has grown from being a maker of paper sacks to a leading manufacturer of flexible packaging.

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Highveld Steel & Vanadium Corporation Ltd Changing times Currently the only South African producer of heavy steel sections, Highveld is making plans to boost productivity.

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Hi-Tech Automotive Better than the original Replica cars are being taken to a whole new level by a specialised and versatile manufacturer in South Africa.

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Stuttafords You are being served Stuttafords is that increasingly rare animal—a department store—but it’s one of a kind, and certainly no dinosaur.

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Contents

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Kenya Ports Authority From spices to containers The port of Mombasa is now a highly efficient operation that is growing daily, despite a number of obstacles.

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Water Corporation A sustainable supply Western Australia gets drier each year, so must turn to other climate independent sources for its water supply.

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Foskor Mining a fertile field This mining and processing group is no longer mining foskorite as it refocuses its strategy and resources.

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Harmony Gold Unlocking a treasure trove This gold producer is hoping to see its success continue, with projects in Papua New Guinea and beyond.

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Simcoa Operations Waste not, want not This leading producer of silicon has dedicated time and effort to achieving efficiency and zero waste.

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Neotel The golden thread South Africa’s first converged communications network operator prides itself on its truly modern service offering.

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Escher Process Modules A flare for innovation Firm and long-standing relationships with oil and gas companies are key for this process technology company.

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Tullow Uganda A worthwhile endeavour The discovery of significant oil resources in a remote and environmentally sensitive area of Eastern Africa presents many challenges.

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Jay Do manage Hotel at a inspiring q of-a-kin

Customer focus: Ritz-Carlton Palm Beach

nspired

yne Flannery talks to onald Stamets, hotel er at the Ritz-Carlton Palm Beach, Florida, about the unique and qualities of this onend oceanfront resort

D

onald Stamets, hotel manager of the AAA Five-Diamond, Forbes Five-Star Ritz-Carlton Palm Beach resort, is not given to the use of superlatives to describe the hotel he presides over. Words simply cannot do it justice. With an Ocean Boulevard address, in a legendary location, this very special hotel exudes all the charisma and mystique of Palm Beach.

The centrepiece of the Ritz-Carlton is a dramatic 3,000 foot oceanfront terrace—the only one of its kind in Palm Beach—which is set off by an equally dramatic 45 foot long water fountain wall. When the sun goes down, the terrace is transformed with a fire pit to provide a stunning backdrop for al fresco cocktails and dining.

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PHOTO CREDIT: ABB Group

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Customer focus: Ritz-Carlton Palm Beach

For those guests who cannot leave work totally behind, a series of five poolside resort cabanas provides a new dimension to combining business with pleasure. Opening onto private terraces, these air-conditioned cabanas offer a practical space for business professionals to conduct meetings and conference calls and the hotel also offers much larger meeting and conference rooms if these are required.

The focus, though, is on providing a haven to relax, reflect and reward oneself away from the stresses and cares of everyday life. “From a functional standpoint, our proximity to the beach is unparalleled,” says Stamets, explaining that the boom of the Atlantic Ocean resonates in each of the exquisitely appointed guestrooms and suites. “As well as our amazing range of facilities, something that really sets us apart is our multi-generational appeal,” he continues. “Whether our visitors are children or more mature people, whether they are single, in a couple or a group, whether they are with us for a special celebration, or as part of a corporate event, they will all find a unique experience that has been crafted with their needs in mind.”

His role as manager is complex and multi-faceted, but two key elements of the task centre on a requirement to create an ambience where guests can celebrate and feel inspired. “In order to achieve that end, we must become part of peoples’ lives. Our guests come here for a thousand different reasons. Our challenge is to understand each and every one of those reasons if we are to enrich their lives with a unique and unforgettable experience,” he says.

“Our heart and soul and the core of our ability to provide this sort of experience is the service provided by our ladies and gentlemen,” he continues. In the rarefied world of Ritz-Carlton, there are no staff, no associates and no employees. Rather, there is a 400-strong team of ladies and gentlemen, whom he is tasked with motivating, educating and nurturing. He sees this team as the Ritz-Carlton’s most critical asset.

“We look for natural talent matched with a fit for the ethos and philosophy of the Ritz-Carlton. We then take a very individual approach towards growth and development with regular human capital reviews to help people make the most of their talent. It is our belief that this approach creates happier people who can engage on a deeper level with guests,” he says.

“Our service model is based on ladies and gentlemen serving other ladies and gentlemen. This is how we always refer to and think of the people

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Customer focus: Ritz-Carlton Palm Beach

who work with us. It is this approach which really enables us to pull away from the competition and differentiate ourselves from the experience on offer at other resorts.”

Such is the Ritz-Carlton’s dedication to its guests that when a couple due to celebrate a romantic Italian wedding were unable to fly on account of the dust cloud from Iceland’s volcano obscuring Europe, the ladies and gentlemen decided to bring Italy to Palm Beach. “The whole room was decorated as a tribute to Italy and the Italian sense of style. The bride broke down and cried when she saw what had been achieved on her behalf.

“Of course, other hotels within our luxury segment have pools, beachfront positions, valet parking and so forth,” he says. “It can be very hard to differentiate but I believe we have achieved it with a very avant garde approach to service. Take the recent introduction of our pool divas for example, where we bring a concierge service direct to the poolside, in an informal and very innovative way.”

It is all part of the hotel’s determination to create a new sense of ease and accessibility. In so doing, it has created a new benchmark for service within the Ritz-Carlton group.

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The hotel’s ladies and gentlemen are also seen as a vital link with the local community. When the hotel closed for refurbishment in 2006, everyone was retained on the payroll, but assigned to one of the charitable or not-for-profit organisations across the county. The hotel industry is renowned for its high turnover; and Stamets found it very gratifying that 85 per cent opted to stay the course and return to the hotel when it re-opened in March 2007.

When it comes to more tangible elements of the Ritz-Carlton experience, Palm Beach has also broken new ground. Todd-Avery Lenahan, principal with interior design firm ABA Avery Brooks & Associates, was responsible for the new look and feel of the resort. The $130 million transformation and expansion project featured a host of original design elements that caused even the sophisticated clientele of the Ritz-Carlton to pause and take breath.

The grandeur of the new foyer and its adjoining terrace, with stunning clear views to the ocean, is a fitting first introduction to Palm Beach. Each of the hotel’s

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Customer focus: Ritz-Carlton Palm Beach

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oceanfront suites were also renovated, at a cost of over $100,000 each. The suites now offer unparalleled luxury with two bathrooms featuring multi-jet oversized showers, two HDTV flat screens, woodlined custom closets and double-sized private balconies.

A series of restaurants is currently under the direction of executive chef Ryan Artim; and the hotel intends to add another evening dining experience to the portfolio later this year. “We want somewhere grown-up, sexy and casual to complement the restaurants we already have,” Stamets explains. Meanwhile, Breeze is already recognised as offering the best oceanside fare in the area—the restaurant is situated right on the water’s edge, with custom cocktails and gourmet burgers and has the best view for miles around.

The jewel in the crown, though, has to be the new Eau Spa

by Cornelia, which has no fewer than 19 treatment rooms and extends across 42,000 square feet. It is the first facility of its kind in south Florida and incorporates an unusual garden design, complete with rainbow-hued butterflies and numerous elegant water features as a continuation of this key aesthetic that unites the hotel with the surrounding natural environment. The spa aims to offer adults a magical spa experience, but one with a twist.

“Of course, everything is at hand for serious fitness followers, but the emphasis is on fun, indulgence and celebrating oneself and life. It is a place to visit with friends—somewhere to enjoy champagne and mini chocolate cupcakes, as well as soak up the serene environment,” Stamets adds.

Looking forward, investment in the hotel is ongoing. “Our ownership takes very seriously the need to invest in order to maintain our cutting edge. We want to be the first resort of choice whenever someone is coming here on holiday. In order to achieve that, we must evoke change in all its forms.

“I tell my staff that if you always do what you’ve always done, you will always get what you’ve always had. Here, we dare to do things differently. But perhaps most importantly of all, we enjoy what we do.

Life is about having fun and so is managing this hotel,” he concludes. www.ritzcarlton.com/en/Properties/PalmBeach/Default.htm

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engag

An

approach I

n a recent series of the David Attenborough show Life there was a very interesting piece on baboons in Ethiopia that caught my attention for a number of reasons, not least because it parallels very well the spike in mergers and acquisitions (M&As) we are currently seeing.

The action followed one stronger baboon troop taking the opportunity to press home their advantage of acquiring a smaller troop from the same area of cliff, by killing the largest male and capturing the most alluring female. The desired outcome was a larger and more powerful pack that stood a better chance of acquiring more territory from neighbouring troops on neighbouring cliffs. The real outcome was a group of baboons with new family members, a new leader, a mixture of cultures and an underlying tension that showed itself with outbreaks of violence and skirmishes.

In short, a badly co-ordinated, poorly disciplined and clearly disunited troop of baboons. In real terms this false harmony is potentially the very undoing of the troop in the future as they seek to press home their advantages of numbers and scale with rival troops.

This is no different to the activity we see going on today, on the cliff tops of commerce: organisations taking advantage of the current commercial circumstances to press home their advantage by merging with or acquiring other organisations. The motives are invariably greater market share, competitive advantage and bolstering brand image and presence.

According to research published by BBC News, only 17 per cent of mergers add value to the combined company, while as many as 53 per cent actually destroy shareholder value. The remaining 30 per cent made hardly any difference to the performance of companies involved. Unsurprisingly, these results are in stark contrast to the perceptions of top managers, with

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Managing the disruptive staff members that is fre about by a merger or ac often gets forgotten as c maximising commercial s re-defining processes ta But this approach can co as Richard Ferguson exp

Strategic management

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upheaval to equently brought cquisition all too concerns such as synergies and ake priority. ome at a cost, plains

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Strategic management

more than 80 per cent of senior executives involved in M&As believing that their actions had in fact increased value for shareholders.

Yet again, the reality seems to be very similar to that experienced by the baboons: two organisations who go through a tremendously unsettling period as the prevailing culture, leadership, direction, power base and ways of working stabilise and become clear. Too often this period of stabilisation takes too long and the vulnerability, lack of alignment throughout the organisation and uncertainty and fear that go hand in hand significantly compromise the organisation’s success.

Organisations consistently underestimate the impact that uncertainty and competing cultural norms have on the morale, and therefore the performance and productivity, of their staff.

As someone who worked through the M&A of PwC Consulting by IBM Global Services I have first hand experience of the negative impact that this has on teams. I had recently joined PwC so had no cultural allegiance, history or track record; it was like being a jungle referee. When threatened, exposed or uncertain, successful and competent professionals resorted to focusing on discrepancies, right down the Maslow hierarchy of needs. Arms were thrown up in anguish at the removal of the expensive coffee machines in offices around the country; emails written in their thousands to complain about the loss of first class travel and hundreds of hours lost in meetings establishing whether the assembled team one found oneself in was ‘deep blue’ or ‘light blue’.

The net result? A lot of unhappy, poorly focused, distracted and badly led individuals expected to go out and perform great client work while their uncertainties and anxieties were duly ignored. The new organisation focused its transformation effort on crashing together the processes and order books to maximise the commercial synergies that were obvious. There was very little or no effort spent on trying to address some of the issues I have outlined above.

Five years on and IBM Business Consulting is a very successful consulting organisation with some great quality people, processes and solutions and it’s a great place to work. However, like the Kubler-Ross model it shows that the change journey organisations and individuals go through is inevitable; so why do organisations choose to ignore it?

In an M&A situation, organisations can choose to pretend that the people issues are not significant and will sort themselves out with little effort, or

they can invest energy in flattening the curve and speeding up the journey along it. So what should a newly acquiring and / or acquired organisation spend leadership time resolving?

Recognise and acknowledge the issues that will present themselves at the outset and create space for people to air their views.

I have yet to meet a member of staff in any organisation who comes to work to do a poor job; we all strive to do a good job and are perceptive enough to identify the fears and concerns that arise in an M&A situation. Leaders should acknowledge these fears and create space for them to be discussed in a positive, supported and controlled way. The conversations will happen at the coffee machines, in smoking rooms and the canteen anyway—why not be part of the conversations and shape the discussion to speed the process up?

Build a single, clear, compelling and emotionally engaging picture of the future for the new organisation.

No M&A activity is ever undertaken lightly and will always have very clearly defined commercial goals or associated benefits. Often this is the only yardstick or measure that gets talked about and it is often rational and emotionally unappealing and disconnected from the majority of staff in the business. Businesses need to create a compelling picture of the future that people can emotionally engage with, and create a common currency that can be used to fight the inevitable discrepancies and disagreements as the hygiene factors get shaken out and aligned.

Raise the leadership bar for all leaders in the organisation.

Too often, managers and supervisors are promoted on their technical / transactional ability and when it comes to the tough challenge of leading through a significant organisational transformation, are found wanting. Leadership in an M&A is not the sole preserve of the board—the responsibility to actively lead, create direction and confidence, and energise and engage people is the responsibility of leaders throughout the organisation.

It is the responsibility of the board to engage the new leadership cadre and task them with leading their people through the challenging times ahead.

The kind of support that enables the leaders to grow and develop to be able to succeed in this demanding role is an investment that should be built into any merger and acquisition plan.

Richard Ferguson is director at Sensei UKE www.senseiuke.com

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Ian Cummins, VP EMEA, Network Instruments, discusses the challenges faced and the considerations that should be made when tackling a move to a cloud computing environment

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n these times of spending cuts, a move to cloud computing might seem the obvious answer, and it is becoming increasingly likely as the introduction of flat rate billing and flexible tariffs removes the ‘consumption-per-use’ anomaly. For a set monthly fee, organisations can have the same computing power and applications as multinational conglomerates—without the capital expenditure, management headaches, costs or considerations.

However, such an apparent gift horse does not always offer a smooth ride.

A scaleable and often virtualised computing environment brings trials and cultural changes.

The concept of the cloud is straightforward enough, but unless the setup, operational challenges and minutiae are understood, recognised and addressed, a cloud resource won’t be able to deliver the full economic benefits and flexibility promised. In fact, the opposite is likely to be the case. Employees will face quality of service issues and lack of computing resource, both in terms of network capacity and application choice. Partner and customer access could also be seriously affected, costing the business sales, service and brand stake. Security will also become a problem, especially where the cloud provider is lax with data storage.

So how do you avoid the critical cloud challenges?

• Ensure your existing network infrastructure can handle the bandwidth demands of cloud-based applications.

• Set up application usage policies to prioritise traffic and ensure application reliability and network performance.

• Prepare the IT team for changes in network management focus and the wider workforce for changes in business processes and culture. All employees need to understand the benefits of the move from a personal, as well as a business perspective.

• Have contingency plans in place for scheduled and unanticipated internet outages e.g. a back-up ISP. • Don’t allow yourself to be held hostage by your ISP and have strict, answerable SLAs in place.

• Ensure your cloud provider offers the freedom to install new applications without complex network administration and contract restrictions.

• Where a complete virtual environment is set up, be sure your service provider has adequate storage facilities.

• Set up internal back-up provision.

• Use the most appropriate cloud provider for your operational needs. Ensure it has the flexibility for you to scale up or down based on business requirements.

Cloud computing appears to offer great benefits. IT teams no longer have

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Infrastructure

to manage large infrastructure deployments, server configurations or complex application delivery. IT budgets are freed up as a direct result of harnessing third-party computing and processing power delivered via the cloud.

In quick summary, the key benefits at this point are the ability to quickly scale services and applications to meet changing business and user demand, while avoiding the capital cost of expensive network assets for intensive but infrequent computing tasks.

However, this is where the crunch comes. By providing increased IT flexibility, cloud computing shifts IT management priorities away from the network core to the point of WAN/internet connection.

This extends the network beyond the safe confines of the corporate firewall. It is recognising and understanding the implications of this shift that is vital for IT teams. They need to prepare the network and completely rethink management styles to realise the true promise of cloud computing.

So how can you ensure effective planning, deployment and management of a cloud computing environment?

1. Conduct pre-deployment and readiness assessments Determine existing bandwidth demands per user, per department and the organisation as a whole. With the service provider’s help, calculate the average bandwidth demand per user for each new service you plan to deploy. The IT team can then scale the internet connection and prioritise and shape traffic to meet the bandwidth demands of cloud applications.

2. Shift network management focus Maximise the cloud computing advantage by pushing the application, data storage and processing burdens on to a virtual network.

Shift management priorities from internal to external data concerns. This will significantly impact the decisions made—from network monitoring and WAN performance tracking through to the personnel and resources to be devoted to managing WAN-related issues.

Use cloud and SaaS applications to move bandwidth demands away from the core network where processing power is focused.

3. Determine and set priorities Data prioritisation becomes vital when reliance is placed on a single pipe responsible for handling the vast majority, if not all, of an organisation’s applications and processing.

If a single IP consumes 30 per cent of the available bandwidth it becomes unworkable. Therefore applications must be prioritised and traffic throttled to ensure capacity is best allocated.

4. Set-up ISP redundancy Assess the reliability of the existing ISP, its SLAs and service assurance. Be aware of scheduled maintenance and consider the feasibility and practicability of having multiple providers to provide back-up should downtime or performance become an issue.

5. Make ISPs accountable SLAs must take on greater importance in a cloud environment. Unlike a standard network environment where traffic can be monitored from client to server, immediate problem identification and resolution is far more complex in cloud because the majority of data is controlled by the service provider, making it extremely difficult to monitor, optimise and troubleshoot connections.

These SLAs should specify expected internet service levels, performance obligations the service providers must meet and define unacceptable levels of dropped frames and other performance metrics.

It’s not in the provider’s interest to tell a customer when service drops or fails completely. Therefore it’s vital to have a network analyser in place to provide an independent overview of WAN link connections.

The most effective way to do this is to use a network analyser with a WAN probe to verify service levels.

This will provide management reports that show whether or not the provider is meeting its obligations.

However, an SLA alone is not enough to guarantee your organisation receives the level of service promised. Security is a major concern.

• Who within the cloud’s employee base has access to data?

• How is a customer’s data segregated?

• Is it encrypted?

• What happens in the event of a disaster or security breach e.g. who is responsible for data recovery and restoration, and how long will this take?

• What happens to the data if the cloud provider goes out of business; and what provision, if any, is put in place to provide alternative application resources?

To conclude, cloud computing is no longer a buzzword: it’s a realistic way for organisations to have network flexibility, scalability and computing power for minimum investment. Like most technologies, these services are not without risk and require proper preparation and management to succeed. If a network is adequately prepared and the IT team works with the management to support change they will realise the true promise of cloud computing.

Ian Cummins is VP EMEA, Network Instruments www.netinst.com

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From

sack topa A

fripack was founded in 1933 and CEO Arnold Vermaak is keen to point out that this makes it one of South Africa’s oldest packaging companies. The company began life by creating a niche in a small segment of the packaging market, namely cement sacks for industrial usage. Over the years came a steady process of consolidation and expansion. This was fuelled firstly by organic growth and then more recently by diversification and acquisition, which culminated last year in the acquisition of the flexible packaging division of Astrapak.

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Afripack Pty Ltd is today flexible packaging marke Jayne Flannery about the a simple manufacturer o

Afripack Pty Ltd

kack

y a leading player in South Africa’s et. CEO Arnold Vermaak talks to e company’s evolution from being of paper sacks

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Afripack Pty Ltd

Airconditioning Amalgamated The owners of Airconditioning Amalgamated, Mr. Stuart Jenkins and Mr. Gordon McRae, have 60 years of experience between them in the air conditioning and refrigeration industry. Some 14 years ago, a project came about with Plastop in Prospecton that, after its acquisition by Astrapak, has grown into further contracts, many requiring unique solutions, with the Astrapak Group/Afripack. The scope of projects/capital business has run to in excess of R40 million and has been underpinned with Group maintenance contracts. Furthermore, at the Group’s Annual Award Dinners, the company has consistently received awards for its innovative solutions and service delivery.

The R184 million deal effectively doubled Afripack’s turnover overnight and created a powerful new contender in South Africa’s R11 billion per annum flexible packaging industry. The company is now positioned as one of the most diverse flexible packaging operations in South Africa with a strong intended orientation towards what Vermaak describes as high end, added-value products.

He attributes the company’s transformation to a three pronged strategy centred on market focus, advanced technology and developing and motivating the best people in the business. Here, he takes up the story, beginning with the company’s expansion into consumer markets: “Although we were very successful in industrial markets, particularly as a sack manufacturer, we knew we were missing an opportunity if we did

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Afripack Pty Ltd

Bigfoot Express Freight Bigfoot Express Freight prides itself on 100 per cent PDI ownership and conforming to BEE requirements.

Superior service and excellent customer care further distinguish our company from our competitors; and our commitment to quality has led us to obtain ISO 9001.

Our strategically placed branches provide an extensive national footprint. A process-driven and constantly monitored operation combined with highly skilled staff enables us to offer a reliable, speedy, secure and costeffective freight solution. We have a fleet of 170 gps tracked vehicles, which are maintained by the relevant agents. Services such as internet track and trace and in-house solutions further benefit our clientele.

not develop a presence in consumer packaging.

Our aim was to diversify, but to retain a very clear focus on flexible packaging. We were not looking for something the size of the Astrapak division, which included a total of five companies, but it was too good an opportunity to pass over,” he explains.

The acquisition of Astrapak’s flexible packaging division was finally concluded in August 2009 and Afripack has now succeeded in integrating Astraflex, Cape Wrappers, DLC, Tamperpak and Astra Repro, as well as Standard Labels in Mauritius.

The new corporate entity is known as Afripack Consumer Flexibles, or ACF, and its formation has also entailed a radical rethink of how the much bigger business should be structured. The new organisation centres on two primary clusters—flexibles, which

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Afripack Pty Ltd

Cartonal Italia Cartonal Italia is a reputable and well-established supplier of flexible packaging material in RSA. Among others, Cartonal has supplied Afripak for almost 15 years. The essential principle guiding this longterm business collaboration is the commitment to professionalism, integrity and quality.

Cartonal built its reputation on financial strength, stability, experience and continuing relationships, with technology also playing a significant role in improving its efficiency in communications, logistics and management.

Cartonal employs bright and innovative experts from a variety of fields, giving the company flexibility and a wealth of experience. This allows it to offer an array of resources that can be tailored to the individual needs of each customer.

The Consumer Flexibles division, known as ACF, now offers an extremely broad product portfolio geared towards premium product offerings with the flexibility to tackle both long and short run work. There are various wax paper products and a wide range of both solvent based and solvent free laminated packs. Tamper-proof banding is a particular growth area and Afripack holds the South African licence for the Fujiseal system.

A recent fire at the ACF KZN plant in Durban was quickly turned into an opportunity to improve the ACF facilities even further and resulted in another tranche of investment in state-of-the-art plant. The ACF Cape plant in Paarl is being augmented with an Uteco gearless press, as well as an upgrade of the existing F&K gearless press to 10 colours and GPS computerisation, making it arguably the premier flexographic press in the country.

Already, the Cape plant has won many printing

“We were not looking for something the size of the Astrapak division, which included a total of five companies, but it was too good an opportunity to pass over” includes the former Cape Wrappers and Astraflex— and secondly, a dedicated labels division.

The ACF Flexibles division features two dedicated consumer flexible plants situated in Durban and Paarl.

The division has a total of eight flexographic presses, including an F&K gearless press, numerous modern slitters and several Nordmechanica laminators.

The ACF Labels division has three narrow web consumer flexibles plants—DLC in Durban, Standard Labels in Mauritius and Tamperpak in Gauteng. This division has several Aquaflex and Mark Andy narrow web flexographic presses, slitters, a Stanford shrink sleeve line and a Seamer. The new division has pioneered the development of shrink sleeve labelling and has received numerous awards for its innovative use of films, inks and coatings for premium brands.

At the time of the purchase, Vermaak stated clearly Afripack’s view that the purchase represented the best in people and technology, with an excellent combined customer base and strong supplier commitment. “It has given us the perfect platform from which to grow a highly successful consumer flexibles business,” he states.

and packaging accolades, notably the FTASA Print Excellence and Gold Pack Awards. Equally telling, Afripack is a packaging supplier of choice to the South African operations of a number of leading global brands, including Unilever, Nestlé and Cadbury.

“It is our technological advantage within ACF that enables us to print on such a wide range of flexible materials including cellulose films, PVC, polyester, polypropylene and poly-ethylene, as well as on a variety of paper substrates and their coated and metallised counterparts,” Vermaak explains.

The other plant in the Consumer division is based at Durban and this is due to see a new Rotomec gravure press from Italy installed early next year.

“We see the quality of our technology as a very important differentiator,” he continues. “From a technological perspective, when our new gravure press is introduced, we will then have both the best flexographic and gravure technology in South Africa.

These are First World investments which is big news here and the most significant addition to South Africa’s overall printing capability in a number of years.

“Strategically, we made a decision a number of

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Afripack Pty Ltd

Covinil Films

Fima

The company has always been known in the market

Fima currently serves the Afripack Group from its

for the development of speciality films. Covinil has

plant in Chamdor, South Africa and has been servicing

developed different films for the Twist wrap market

them for many years with a range of packaging and

coming from PVC, CPP and now introducing the

labelling products. At Fima, we live for innovation

new products manufactured in the new PET line.

in the packaging industry and working closely with

Afripack and Covinil have always worked together

our partners like Afripack, who also succeed to be

in the R&D field in order to create possible solutions

innovative, we work well together to produce products

for their clients.

beyond those of our competitors.

years ago that the quality and waste reduction benefits derived from leading technology justified the higher upfront investment,” he continues. “We have chosen to buy the best brands from the best manufacturers in the world. We may not be the largest player in the flexible packaging marketplace, but when the gravure press is commissioned in January 2011 we will be able to offer the best equipment in South Africa.”

Afripack has further strengthened its position

through strategic alliances which give access to an even wider range of packaging solutions—all of which share Afripack’s commitment to high-end offerings manufactured to the highest standards using the best technology available.

In 2007, an agency agreement was signed with Mondi Coating Zeltweg (MCZ) in Austria, an international producer of extrusion-coated and laminated consumer packaging materials which targets the food, pet-food,

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Afripack Pty Ltd

Henkel South Africa Afripack Consumer Flexibles and Henkel South Africa have enjoyed a highly successful business partnership since the late 1990s. Henkel, as the world’s leading supplier of laminating adhesives under the Liofol brand, ensured that Afripak remained at the cutting edge of technology through the adoption of ‘Smart Cure’ technology. Henkel strives to partner with innovative companies looking to constantly add value to the supply chain.

non-food and pharmaceuticals industries. As a result, ACF can supply the local market with a wide range of laminated packaging solutions. MCZ has stateof-the-art extrusion coating technology which lends itself to a complete product portfolio ranging from polyethylene coated papers to highly sophisticated multilayer laminates and high-end direct coated aluminium foil and polymer films.

Last year, the partnership with Mondi went a step further when ACF entered an agreement with Mondi Consumer Flexibles Europe. The company has extensive experience as a manufacturer and supplier

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Afripack Pty Ltd

“It is our technological advantage within ACF that enables us to print on such a wide range of flexible materials including cellulose films, PVC, polyester, polypropylene and poly-ethylene” of film extrusion products and flexible packaging solutions from film extrusion and printing to the converting of films and flexible packaging solutions.

It means that Afripack can offer another new range of high performance solutions, including for the first time, new products like stand-up pouches to the local market. These pre-made, stand-up pouches constructed from high-performance laminates and barrier materials were previously unavailable in South Africa and represent a new and very convenient, user-friendly packaging format that is chemically and physically durable and can also be sterilised.

The other big partnership which has supported Afripack’s rapid penetration of the consumer market is with promotions company Autopack, which supplies promotional items such as stickers, tattoos

and scratch cards. The company is located in Pablo Podesta in Argentina and has more than 100 blue chip clients, including Unilever, Avon Cosmetics, Wella and AGFA. Again, the emphasis is on providing a continuous stream of innovation. Autopack’s laboratories are engaged in a continuous quest to design new cutting edge campaign proposals and product offerings, constantly experimenting with different techniques and materials to achieve maximum impact on the consumer.

The overall range and scope of Afripack’s product portfolio may have a distinctly sexier new edge, but Vermaak is keen to point out that the company’s former industrial business has also been carefully nurtured. “We are still a very strong player in our original sack market, with leading edge technology

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Afripack Pty Ltd

Rubber Engineering Rubber Engineering offers a comprehensive rubber and polyurethane roller recovering service for the printing,

packaging,

aluminium,

steel,

labelling,

textiles and related industries. A 1,200 square metre factory in the Pinetown suburb of Durban, Kwazulu Natal, comprises a modern purpose-built plant with two overhead cranes that can support weights up to 6.5 tons and can cater for large rollers.

and long standing exclusive supply relationships to local cement companies like PPC and Lafarge.

We realised some time ago though that this was far too narrow a focus and that there were other opportunities in the industrial packaging market.

In 2004, we started to take these opportunities seriously when we invested in a reel-to-reel plant with two gearless eight-colour flexography printers and an extrusion coater, enabling us to supply the paper industry with ream wrap. We have since gone on to develop extensive supply relationships with paper companies Mondi and Sappi,� he says.

Sack manufacture takes in many complex equations.

From handling in the distribution chain, from the point of filling the bag to delivery at the end user, the sack is subject to many distinct forms of stress. Even the flow characteristics of the product that will go into the sack and the type of filling machine to be used bring an influence to bear on how manufacture should be approached. Afripack has close to a century of experience in optimum sack construction—knowledge that has been complemented by investment in state-of-the-art plant.

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Afripack Pty Ltd

Afripack has spent in the region of R175 million over the last decade in enhancing its industrial capability.

The result is Afripack Industrial Flexibles (AIF), which is now recognised as a leading player in the industrial flexible packaging market, supplying multi-wall paper sacks and flexographic printed and extrusion coated products. The plant operates 24 hours a day, seven days a week, and relies on two fully automated, high speed sack lines supplied by Windmoeller and Holscher of Germany. These have a massive combined capacity of 140 million sacks per annum.

However, the finest machines in the world are only as good as the people tasked with operating them. Vermaak is convinced that the best long-term sustainable advantage in the marketplace is derived from having empowered and motivated people. “Our people are our most fundamental asset and we have to have the right culture in place before we start adding other elements, such as technology,” he states.

Black Economic Empowerment is a vital part of both the company’s past and its future. Until 2004, Afripack was wholly owned by Pretoria Portland Cement (PPC). The following year, the company completed a BEE transaction and the current shareholding is now dominated by Nozala, a broadbased black female group with major secondary holdings in the hands of PPC, South Africa’s largest cement company and a management consortium. All take an active interest in the company’s development.

Vermaak believes that the cultural values that have become embedded in the organisation have a particular South African slant. “Our culture is characterised by empowerment, ownership and a high degree of transparency and trust. As an organisation, we have a distinct culture and style. It features flat organisational structures and fast decision making and all of our people are involved in the day-to-day running of the business. We have total transparency

when it comes to results and performance and our people understand that they are wholly accountable for the results they produce. At every level of the organisation we are performance driven and everyone shares the same belief that giving long term sustainable value to customers is what really matters,” he says.

An acquisition of the size of Astrapak’s flexibles division could not have happened without the unqualified support of all shareholders—a large portion of the purchase price was funded by shareholder funds.

The Afripack motto “SISONKE”, or “we are together” seems particularly apt in this instance. Meanwhile, the new business is in the fortunate position of having funding available for further growth opportunities.

Vermaak believes that while the integration of Astrapak’s flexibles business and subsequent restructuring has effectively created a powerful cohesive entity with a single, shared vision, it is only an interim step. “We are a progressive, far-sighted company which still has much more to achieve,” he concludes. www.afripack.co.za

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Changing

time

Moving to a new country and taking over the running of a new company can throw up challenges for even the most experienced of managers, as Alan Swaby learns

T

he new CEO of Highveld Steel and Vanadium Corporation Limited in South Africa has been in the industry long enough to remember when vertical integration among steel makers was the norm. “Then businesses went through a phase of focusing on core activities,” says Scott MacDonald, “and steel producers divested their iron ore mining interests. Once again, the wheel is turning full circle but Highveld is already there. We never went down that route; we have always processed the ore we mined ourselves and benefited considerably in the process.”

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H i g hv e l d S t e e l a n d Va n a d i u m C o r p o ra t i o n L i m i t e d

“Highveld has considerable respect among end users and we have to take full advantage of that” One of the benefits is that in its 50 year history, Highveld has been profitable every single year and in fact only ever lost money in the first quarter of this year. “Our oxygen supplier had a problem,” explains MacDonald, “and failed to deliver for three weeks. Production was hit badly, not only because of the lack of oxygen but also the need for a gradual thermal build-up once the situation stabilised.”

In 2006, this long-standing record attracted the

attention of Evraz, a Russian steel producer every bit as vertically integrated as Highveld but much more global in outlook. In 2008, the sale of Highveld from Anglo American to Evraz was completed to go with its other world interests in the UK, the Czech Republic, Italy, Canada, the US and Russia.

MacDonald’s recent appointment has coincided with one of the most volatile periods in the company’s history. “Like all steel producers,” he

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H i g hve l d S t e e l a n d Va n a d i u m C o r p o ra t i o n L i m i t e d

Transnet Freight Rail Transnet Freight Rail and Highveld Steel have worked together

since

1957,

with

Transnet

supporting

Highveld’s growth and efficiency drives. Transnet Freight Rail is responsible for over 66 per cent of Highveld Steel’s inbound and outbound traffic, linking the mines to the plants by a rail network that helps ensure raw material arrives on time and healthy stockpile levels are maintained.

We

acknowledge

Highveld

Steel’s

importance

in

the domestic and export steel markets. The fleet of specialised steel wagons supports Highveld in transporting the finished products safely and according to customer orders.

Highveld remains one of Transnet Freight Rail’s key customers. Our mutual objectives mean we value and support the roles and interdependencies we share.

says, “sales have been hit badly and last year they fell by almost half back down to R4.25 billion. When demand improves they’ll bounce back but it’s my job to see that we have the structure and the strategies to capitalise on market improvements.”

No doubt the world perspective he gained from senior roles at Corus and Klöckner & Co will help considerably in structuring management, broadening the customer base and overseeing plant upgrades.

“For a business the size of ours,” he says, “we don’t have as much direct contact with customers as would normally be the case in any other industry.

Highveld has considerable respect among end users and we have to take full advantage of that.”

At the back of his mind will be the fundamental difference between South Africa and Europe in the relative relationship between steel and concrete. In the UK, for example, 25 years ago concrete accounted for 65 per cent of the raw material used in construction

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H i g hve l d S t e e l a n d Va n a d i u m C o r p o ra t i o n L i m i t e d

Vesuvius SA The

Vesuvius

SA

team

works

in

a

successful

partnership with Highveld Steel, with the common objective to optimise total refractory performance in all the Highveld divisions. The latest Vesuvius materials and designs are continuously introduced in all areas.

Vesuvius development and service at Highveld is not only aimed at reducing refractory costs, but also improving steel throughput and quality.

projects, compared with 35 per cent for steel. Today, thanks to effective marketing by steel producers, that ratio has reversed completely. But in South Africa, concrete remains dominant. “It’s a long term goal,” says MacDonald, “but if we can convince architects and developers with the same sort of arguments used in Britain, that will have a considerable impact on sales.”

That’s something of an understatement because Highveld is currently the only South African producer of heavy steel sections. The financial barriers for other suppliers to get into the market are high and not justified by the relatively small local market. So small, in fact, that the home market cannot take all that Highveld produces. But if demand picks up,

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H i g hve l d S t e e l a n d Va n a d i u m C o r p o ra t i o n L i m i t e d

Harsco Metals Harsco Metals has a long and proud association with Highveld Steel, providing resource recovery services on site. Highveld Steel’s innovative solutions for steelmaking echo our own solution-driven approach to metal recovery and slag recycling around the world.

Mukundi Mining Resources An aspirant global leading mining company.

MMR’s vision is to create superior value and benefits on a sustainable basis for all its stakeholders, ensuring that everything we do and deliver today will enable others to realise their vision tomorrow. Striving for excellence and looking after our people are firm commitments in ensuring sustainable growth; and for us “excellence” is an attitude not a skill.

Highveld might find it has competition in this sector.

Which turns the focus on the second part of MacDonald’s role. It’s 50 years this year since magnetite iron ore was discovered at the company’s Mapochs mine, 140 kilometres north-east of eMalahleni (previously known as Witbank) where Highveld’s steel plant is located. The high titanium content of the magnetite ore has necessitated Highveld developing unique processes for smelting and refining the iron ore but parts of the plant are now long in the tooth. Along with his COO and deputy COO, MacDonald has been charged with developing a three year investment plan which will have the greatest impact on productivity with the shortest payback period. “Part of this might involve adding new capacity or new products,” he says, “but most likely it will be a case of updating the plant. And here, we have to assess whether to upgrade what already exists or whether to take a different approach.”

As well as changing the hardware, MacDonald also

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H i g hve l d S t e e l a n d Va n a d i u m C o r p o ra t i o n L i m i t e d

wants to change the mindset of the business. Dealing through steel service centres—steel merchants—the way it does, Highveld has little understanding of how end users work and think. For that matter, MacDonald is not convinced his company fully understands steel merchants either. “We need to get closer at every level,” he says. “It’s the only way we can understand and influence matters.”

MacDonald is on a mission to take cost out of the supply chain. He’s aware that the construction industry is very traditional and works today much the way it has for decades but the objective is to inject some philosophies from the automotive world. “Everyone involved with the supply and consumption of steel needs to modernise,” he says. “We’ll never really match the automotive way

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H i g hve l d S t e e l a n d Va n a d i u m C o r p o ra t i o n L i m i t e d

of working but our aim has to be to satisfy customers’ needs within days, not weeks or months.”

With steel having a well earned reputation as one of the more polluting of industrial processes, MacDonald is torn between the desire to clean up the business he is in and the commercial dangers of doing so unilaterally. “The governments of fully developed European countries are keen to meet their targets of reducing carbon emissions,” he says, “but is the price acceptable? At Corus, we spent a lot of effort trying to explain that clean Western steel can never compete economically with Far East steel.”

On a personal note, as a newcomer to the country, MacDonald is impressed by the atmosphere in South Africa. No doubt the World Cup has been a wonderful catalyst for cohesion and certainly moved on the infrastructure much faster than would otherwise have been the case. “Despite the obvious problems, there seems to be a vast reservoir of goodwill,” he says, “that surmounts even the most potentially damaging events that occur. Long may it last.” www.highveldsteel.co.za

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Betterthano the

Repl to a c

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H i - Te c h A u t o m o t i v e

original

lica cars are being taken a whole new level at one company in South Africa, as Alan Swaby learns

P

etrol heads will need no reminding of the iconic 1960s AC Cobra— often referred to as the Shelby Cobra, due to its association with US racing driver Carroll Shelby. Production ceased in England in 1969 by which time around 1,000 Cobras had been produced.

Today, if such a car comes on the market it can fetch millions of dollars if it has a race history. Even with no track experience it could sell for $200,000.

With such boundless nostalgia and demand for the car, it’s not surprising that an industry has grown up replicating the Cobra—and many other classic cars. But it might come as a surprise to learn that there are between 30 and 40 businesses around the world making Cobras in what’s known in the trade as continuation cars, and turning that model into the most replicated car in history.

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H i - Te c h A u t o m o t i v e

FISCHER

Thermo Fluid Engineering

The first customer designed automotive seat tracks

Through our experience and ability to design and tool

were supplied to General Motors and Ford SA in 1979.

for custom projects, Thermo Fluid Engineering is able

FISCHER seat tracks have been supplied since 1988 to

to supply Hi-Tech Automotive with high performance

leading motor vehicle manufacturers in South Africa

radiators, intercoolers and HVAC units for vehicles

and Europe. FISCHER seat track technology is used

such as the Cobra, GT40, Noble M12 and Rossion Q1.

in Mark 3 Cobra and Shelby Sports cars including the

Contributing to vehicles which are crafted to such

Joule—the first South African developed electric car—

fanatical standards is an exciting challenge and one

built by Hi-Tech Automotive.

that we thoroughly enjoy.

“Most of our output goes to the US and it’s very much a discretionary purchase” Jim Price, managing director of Hi-Tech Automotive in Port Elizabeth, South Africa, was one who was seduced into investing in a continuation kit car business, despite having precious little knowledge about cars. “I worked in construction all my life,” says Price, “and was attracted by the glamour of cars and their contrast with what I was doing. But it didn’t take long to discover that as fast as I put money into the business, it was haemorrhaging out the other end.”

Price realised that the problem related to the availability of parts. Kit cars either used unreliable second-hand parts or required paying through the nose for new parts. “If you made a car from its separately bought components,” explains Price, “it would cost five times the original selling price.”

Price’s solution was to build complete new cars rather than second-hand kits. And he decided to do it himself rather than invest in others—so in 1995, Hi-Tech Automotive was born. With just a handful of employees producing a handful of cars a year, Price has grown the business by 50 per cent per annum and by 2002 was already the largest such supplier of replica cars anywhere.

The company has built 3,500 Cobras in 15 years.

During that time, Hi-Tech has had a couple of body blows to contend with. In 2002, the value of the rand appreciated in value 50 per cent in just a few short months. Then, having coped with that, 2008 saw the automotive business implode and Hi-Tech felt the full force of the recession. “Most of our output goes to the US,” Price says, “and it’s very much a discretionary purchase. Let’s face it—owners tend to be middle-aged and wanting to relive their youth. So when cash is short, our sales feel it immediately. We used to employ 500 staff but now that’s down to 220.”

Given that it is selling heritage cars such as the Cobra and GT40, the name Hi-Tech Automotive somehow didn’t feel appropriate. As such, this side of the business works under the name of Superformance, shipping through a US distributor to a network of dealers. To get around US compliance rules, cars are sold without engines but built specially to the engine specified by the owner. The owner can also decide if he wants a car to the original spec or with a more modern, better handling chassis. In all cases, though, the aluminium bodies have been replaced by lighter fibreglass.

Hi-Tech has invested huge sums in its engineering and construction facilities. Ironically, while Port Elizabeth is the Detroit of South Africa, Hi-Tech doesn’t employ conventional automotive workers.

“They are usually of no use to us,” he says. “They’re used to working on very narrow aspects of a car and having the support of a huge organisation behind them. We want our engineers to turn their hands to anything, so we take promising graduates and teach them about life on the shop floor before they ever get their hands on a computer and CAD package.”

Depending on specification, a Cobra can sell for up to $70,000 and a GT40 for $100,000. To remain competitive, Hi-Tech has its own sophisticated machine shop which turns out dozens of parts that would otherwise be too expensive to buy. “Of course there are certain components such as brakes and electronics,” says Price, “that we can’t make and here we rely on the good relations we have with OEMs to get reasonable prices. But if it’s something within our capabilities, we can make it for less than half the trade cost.”

But although Hi-Tech is unconventional when

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“We want our engineers to turn their h graduates and teach them about life o their hands on a computer and CAD pa

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hands to anything, so we take promising on the shop floor before they ever get ackage”

H i - Te c h A u t o m o t i v e

compared with other car makervs, it is light years away from the kit car company that first attracted Price—so much so that the other side of the business truly is ‘high-tech’.

Petrol heads will also be familiar with the highly respected Noble M12 sports car designed by Lee Noble but surprisingly built in South Africa by Hi-Tech. Noble has since severed his connection with the company that bears his name and has set up shop once again under the name Fenix. Orders for his new car have already been received and they will be built by Hi-Tech.

“We have the ability to turn our hands to many things,” says Price.

“But we have to remember that we are a low volume manufacturer.

When the numbers go higher than 300 units a year, it changes the whole perspective of the game—and that’s not what we want.”

To demonstrate its versatility, Hi-Tech is preparing to build a trial run of a new South African entry to the electric car market. The contract with Optimal Energy will be to prepare a pre-production fleet of cars while Optimal’s own factory is being built.

With 20,000 square metres of factory space to occupy, HiTech has plenty of capacity for new projects; but Price’s heart is still bound up with the continuation range of cars. He likes nothing better than playing host to visits by owners’ groups wanting to see where their dream cars originated. w w w. s u p e r f o r m a n c e . c o m / A b o u t u s . a s p x Editorial research by James Martin/ Vincent Kielty

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Youarebei

s

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Stuttafords

ing

served Stuttafords is that increasingly rare animal—a department store. In fact, it’s one of a kind; but no dinosaur, as its executive chairman Hilton Mer is determined to prove.

He explains all to John O’Hanlon

F

ounded in 1858, Stuttafords certainly has a venerable and established presence in southern Africa. It is a brand that is associated with quality on the continent as Selfridges might be in the UK or Bloomingdale’s in the US. It’s about the same age as these institutions, which still thrive today—but then, the department store was very much a 19th century invention. Countless other names that used to be as well known to the public no longer exist, and today, only a few survive.

In Africa, there remains no really traditional comparable competition, says executive chairman Hilton Mer. “And we seek to distinguish the level of our concept, product and service offerings from the new generation of multi-

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Stuttafords

Musgrave Agencies Established

in

1980,

the

Musgrave

Group

of

Companies is arguably the single largest distributor of international apparel brands in southern Africa, boasting management of some of the world’s most sought after brands, including Quiksilver, Roxy, Volcom, DC’s, Lee, Wrangler, Jeep, Ellesse, Fox Racing and Salomon.

Musgrave Agencies is a dynamic, rapidly expanding company with extensive expertise in local and international clothing industries. It has recently established

an

impressive

track

record

in

the

distribution of outdoor apparel in South Africa with the growth of the Jeep Apparel brand.

Essential to the brand building process was the establishment of a relationship with leading retail group, Stuttafords, who feature a range of Jeep men’s and ladies’ wear.

department stores. Over the years, Stuttafords gobbled up the historically similar concepts.” It was a family business until it went through a series of leveraged buyouts, which shifted the focus from customer service to shareholder value, with the consequence that some of its core values got neglected until the chain came into the ownership of its present experienced pool of shareholders representing private equity interests focused on retail investments.

What was needed was leadership to bring this well-known and respected but somewhat oldfashioned chain of stores into the 20th century, which is why early in 2009, the owners secured the services of Mer, who has many years’ experience at the helm of major retail and distribution businesses in South Africa, including Metcash and Super Group.

A commercial lawyer by training, Mer understands the African consumer market in general and in particular the customers right across the LSM (living standards measure) and is thus clearly able to distinguish those that Stuttafords caters for and intends to satisfy going forward.

He warns against trying to be all things to all people, but felt that this was a company that had massive opportunities to expand its market. “I think that there used to be a market perception that Stuttafords is a store that serves only the highest end of the market and is inaccessible to middle income earners. That was never true in my opinion; that people thought that

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Stuttafords

The Scottish Knitwear Group The Scottish Knitwear Group, representing the iconic Pringle of Scotland brand, has been associated in business with the Stuttafords Group for over four decades. Pringle of Scotland has engaged with and built an enviable reputation among Stuttafords’ consumers, which has helped the brand towards becoming

one

upstream

luxury

of

South brands.

Africa’s We

most

popular

acknowledge

and

respect the contribution made towards the success of our brand and eagerly look forward to being part of the continued success that is Stuttafords.

But far from representing an exodus to the cheap clothing chains, Mer is convinced these customers can be retained. “We regard this as an opportunity wide open to us right now. I don’t think we have tapped that market at all—or the market doesn’t understand that we have those offerings! We are currently supplementing our ranges with that in mind, but without detracting from the brands we have always had and will continue to offer. We are clear that, in addition to our traditional customer base, we want also to attract the younger shopper and the LMS 6-7 shopper; but our entry-level offerings won’t be the same as the mass market.”

So his aim is now to reach out to these categories

“I think this is an expansion opportunity, not just a retention opportunity. We are not changing the nature of the business, just communicating our offerings” way simply reflected a lack of communication on the part of the business and, perhaps, some inadequate in-store merchandising concepts.”

So while guarding the stores’ reputation for quality and service, he wants to broaden the appeal of Stuttafords to include a broader range of income groups and especially the younger shoppers that represent South Africa’s modern aspirational generation. “While we are certainly not planning to go into the mass market, we do believe that people in the LSM 6 upward range of the market are all potential customers for our stores.”

For a department store, Stuttafords is actually highly focused: it has clothing, cosmetics and housewares, and in all of these it excels in managing and selling international brands and brands exclusively labelled for its stores. In the cosmetics departments you can see counters dedicated to names like Christian Dior or Estée Lauder; and in 2007 it introduced Gap, Banana Republic and French Connection clothing ranges and also Calvin Klein underwear to southern Africa. “We rely on high quality, reputable international brands. There is a significant amount of brand loyalty in regard to labels like these. But when consumers are under pressure they may move to more economical offerings and we aim to fulfil some of these expectations within the framework of suitable products.” A result of the recession has been that consumers are more prepared to shop around, he says.

of shopper to tell them what’s on offer. “Now we are making the offerings, supplementing the offerings and we are going to be communicating those offerings. For me that represents the opening of a whole new market opportunity that should always have been there but was never taken advantage of,” he says. “I think this is an expansion opportunity, not just a retention opportunity. We are not changing the nature of the business, just communicating our offerings, and to some extent broadening them for those target markets.”

Stuttafords has 13 stores in South Africa, plus one in Windhoek and another in Gaborone. “Each store is a unique strategic business unit and each one has to wash its own face,” says Mer. There are flagship stores, signature stores and smaller stores in this portfolio, and though they all reflect the design and layout of the group, they are stocked according to the local market. “We add value in a lot of areas in each store and make sure our footprint remains relevant and appropriate. But I do not think that there is, at present, room to open a whole lot more large department stores than we have already without cannibalising sales.” In the short term at least, he has no intention of expanding further outside of South Africa. “We are looking to maximise the existing businesses in South Africa.”

Some things don’t change though. Don’t expect to see Stuttafords moving into e-commerce like Bloomingdale’s. A department store relies on

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Stuttafords

“We add value in a lot of areas in each store and make sure our footprint remains relevant and appropriate” people actually coming in, so although the website is currently undergoing a complete makeover over the coming months, this is principally aimed at information to woo the defined market. Information was the main missing ingredient, Mer found— and not only information directed at the customer.

“When I came in, I said that I remembered telling my management teams in the 1990s that if you have them, management information systems attached to the right IT platforms represent a huge competitive advantage. I now tell them that if they don’t have them they will suffer a huge competitive disadvantage! The business has travelled exceptionally well despite the fact that the systems were a little dated. We are

rapidly changing those things.”

Mer is therefore driving investment in new software and new extraction systems: “What I call slice and dice systems,” he clarifies. “We have tens of thousands of SKUs in this business—I don’t believe you can efficiently manage and oversee the rotation of all that stock without having the ability to tap into focused information in real time and not spend days navigating through data. So we are putting all those things in place.”

All of these initiatives will undoubtedly improve the efficiency of the business dramatically, bringing with them greater customer satisfaction and of course, profitability. www.stuttafords.com

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t

Fromspices

Despite a number of obstacl has developed into a highly e growing dai

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Kenya Ports Authority

tocontainers

les, the port of Mombasa efficient operation that is ily, as Alan Swaby learns

W

e’re used to hearing about high GDP growth in China and India but until a political squabble turned previously stable Kenya into a riot state for a month, it too had been doing very nicely.

“Prior to 2007, growth had been running at seven per cent or better,” says Bernard Osero, public relations manager for the Kenya Ports Authority (KPA), “but then violence and destruction of infrastructure put the country back again.”

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Kenya Ports Authority

Even while the rest of the world was experiencing a 12 per cent downturn in container volumes after the 2008 banking disaster, total tonnage through Mombasa increased by 16.1 per cent while container volumes went up by 0.5 per cent. As a result, Mombasa is the second most important port after Durban in eastern and southern Africa. Not only does it handle its own imports and exports but it handles freight to and from all surrounding countries— Uganda, Democratic Republic of Congo, Southern Sudan, Burundi and Rwanda—and it’s also more convenient for the northern part of Tanzania to use Mombasa instead of Dar es Salaam.

“Dar es Salaam is around half the size of Mombasa,” says Osero. “Theoretically we are in competition but it is more of a collaborative relationship now that there are closer economic ties between our two countries.

And the available distribution network will always be a major factor in deciding which port to use.”

If there are any weaknesses in the Mombasa story, they revolve around distribution. Only 10 per cent of

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Kenya Ports Authority

Tradecon (Msa) Ltd Tradecon (Msa) Ltd is an industrial hardware supplier dealing in wire ropes, bearing and safety equipment amongst other industrial spares.

The company supplies spares to industries like cement, tea, bottling, trucking & transport, petroleum refinery, power generating (combining geo thermal, turbine & diesel) and government supply projects.

Since Kenya Ports Authority adopted the just-in-time purchase model we have supplied it with bearings, wire ropes, industrial computers and electrical, general & technical hardware, from our current specialized stock levels in the range of around US$500,000.00.

To view more about Tradecon please visit our website, www.tradeconkenya.com

freight is transhipped by rail, thanks to an inadequate network and a less than reliable service. Rectifying the problems is on the government’s agenda but at best it will be a long-term solution. In the meantime, Kenya’s roads—albeit good ones—are clogged with trucks.

There’s been shipping in and out of Mombasa for centuries, ever since spice-carrying dhows called there. Over 100 years ago the first of two lighterage wharves was built and the modern Port of Mombasa started taking shape in 1926 when two deepwater berths were created. In the 1960s and 1970s, during the era of the East African Community (EAC), Mombasa was controlled along with Dar es Salaam and the oil port of Tanga by a joint authority of the member countries. But when ideological differences caused the EAC to collapse, Kenya’s ports were taken over by the national government in 1978 and run by the KPA. Although Mombasa is by far the largest, the KPA has other smaller ports dotted along the coast and in the future it will have an additional giant, when the deepwater port of Lamu is completed. Contracts have been signed with a Japanese contractor to undertake a feasibility study into a new 22 berth port, which will relieve some of the pressure from Mombasa.

And a relief of pressure is definitely needed. Using one method of measuring capacity, it is already handling 600,000 teu (20-foot equivalent units) per annum compared with a design capacity of 250,000 teu. In sheer tonnage, this means that 19 million tonnes are passing through the port compared with an absolute capacity of 22 million. Two years ago,

congestion peaked as an issue and the KPA came up with a novel solution of contracting private cargo freight stations (CFSs)—offsite storage areas complete with the necessary customs clearing and freight forwarding facilities.

To relieve pressure completely and to provide badly needed extra capacity, a contract has been signed with the Japanese to build a second terminal at Mombasa. The first phase of this should be ready by 2015 and eventually it will provide an additional 1.2 million teu—in other words, it will triple the capacity of the existing Mombasa facilities.

In the meantime, the KPA has been working hard behind the scenes streamlining the way the port operates, taking out duplication and bureaucracy.

Today, there is an automated document clearance system; the movement of ships and cranes is planned using sophisticated ERP software; and gate management and truck movements are controlled from a central point.

In part, the results have been impressive. Ship turnaround times that once averaged five days are now down to just two, comparing favourably with an international average of one to two days. Where there is still work to be done is on the cargo dwell time, or the time between the moment the cargo is landed to the point when it is despatched.

“The best ports have got dwell times down to a matter of hours,” admits Osero. “Ours too have come down but are still unacceptably long, at around five days. Unfortunately there is only so much we can do because much of the problem relates to road and rail

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Kenya Ports Authority

Bolloré Africa Logistics African transport and logistics are important to the Bolloré Group. It guarantees a tailor-made solution for the logistical transport chains of its customers and Africa’s economic players, regardless of the activities, countries or environments involved. An expert in African logistics, Bolloré Africa Logistics is a partner of excellence for local and international institutional and economic players, and offers a quality service throughout the continent.

links that are largely out of our hands.”

Still, the KPA is investing in different solutions.

Two more gantry cranes have been ordered that will provide operational flexibility of having two cranes offloading one ship. Similarly, extra mobile cranes are on order to ensure quicker attention to smaller ships. And there is always the option of increasing the number of CFSs as demand dictates.

There is no doubt that Mombasa has a lot going for it. It is strategically well placed and has established links with 25 shipping lines and direct connections to over 80 ports. It is a natural deepwater harbour that only needs some additional dredging once every five years, and it’s sheltered from the wind and strong tides. The 7,000 strong, 100 per cent Kenyan work force is also well trained and comprises all the support needed, from nautical engineers to experienced pilots.

But despite all the good points, Osero is concerned by the effect Somali piracy is having on sea freight in general. Already, ships are being forced to take ever longer routes to avoid hot spots impacting on rates and insurance. The trouble is that without intervention, the pirates are becoming ever bolder and reports already exist of attacks 1,000 miles from land. No doubt all at the KPA are hoping that action is taken, so that the country and its economy are free to forge ahead once more. www.kpa.co.ke

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A

sustain supply

Western Australia is a dry state and getting drier by the year: its dams a groundwater can no longer be expected to supply the increasing populati fast-growing capital, Perth, so the Water Corporation is turning to other c independent sources. John O’Hanlon speaks to project manager Nick Chu

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limate change has seen a dramatic reduction in the stream-flows into Perth’s dams by up to 50 per cent, as a result of a 12 per cent decline in rainfall over the last decade. A severe lack of winter rainfall during 2001/2002 required additional investment in new sources— supply capacity was doubled during this period but looking ahead 50 years, the Water Corporation and the community has a huge challenge. This it defines as “to provide water for all in an even drier climate, with twice as many people and with minimal environmental impact.” One of the key ways it intends to do this, in common with other arid areas of the planet such as California, southern Spain, India and the Middle East, is to give desalination a central role.

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Wa t e r C o r p o ra t i o n : S o u t h e r n S e awa t e r D e s a l i n a t i o n P l a n t

nable

and ion of its climate urchill

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Wa t e r C o r p o ra t i o n : S o u t h e r n S e a w a t e r D e s a l i n a t i o n P l a n t

The government of Western Australia announced in May 2007 that its next major water source would be a new desalination plant, the Southern Seawater Desalination Plant (SSDP) on the Indian Ocean coast to the south of Perth. Water from the plant will be fed into the Integrated Water Supply Scheme near Harvey, approximately 30 kilometres inland. It’s a large resource, producing 50 billion litres (50 gigalitres) of drinking water annually, designed with the capacity to expand to 100 gigalitres per year at a future date.

At the completion of the project in late 2011, more than 30 per cent of Western Australia’s water supply will come from climate independent sources. The city has already built the $370 million Perth Seawater Desalination Plant at Kwinana, completed in 2006; and the SSDP project learned many lessons from the construction of that plant. “The design for our first desalination plant was initiated back in 2002 before large-scale reverse osmosis plants were adopted across Australia. Between then and now there has been a lot more research into energy recovery and energy efficiency,” explains project manager Nick Churchill.

The energy requirement for seawater reverse osmosis (SWRO) can now be as low as that required by many traditional freshwater supply sources, according to Energy Recovery Inc (ERI), one of the Water Corporation’s major technology partners in both plants. Improved membranes, increased pump efficiencies and the implementation of isobaric energy recovery devices have dramatically increased the energy efficiency of the process. “We are also getting much more efficient and targeted water quality in the new plant through a new and improved membrane technology process called split hybrid membrane design,” says Churchill.

The other big advance for this plant is the use of membrane filtration as a pre-treatment; before the water comes through to the reverse osmosis, it goes through a series of filters so that when it hits the membrane it doesn’t clog it. “This is a coarser membrane than the reverse osmosis membranes and it ensures a consistent quality of water going through, with better membrane life and more efficient transfer of the water.”

The Water Corporation wanted to retain ownership and control of the plant while bringing in the best practice and most advanced thinking on desalination available in the world. Accordingly, it set up an alliance that operates like a joint venture but with some significant differences. “It is effectively governed by an Alliance Lead Team which operates like a company

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board with participation from the Water Corporation and its non-owner partners (NOPs). The joint venture for the delivery of the project is made up of these NOPs—Spanish companies Tecnicas Reunidas and Valoriza Agua, working with Australian contractors WorleyParsons and AJ Lucas.”

Australian working practices and union laws being somewhat different from those in Europe, this was seen as an effective way of ensuring the project met Australian standards. “That is one benefit of being in the alliance,” says Churchill. “The Water Corporation will own this asset and the alliance will operate it for 25 years after it is commissioned in 2011. We were keen not to just hand over all that expertise and knowledge to the commercial companies but to capture it within our own organisation. We did the same thing on the first desalination plant, and some of the people involved in that are now taking a lead role in the second one.” Knowledge transfer has been designed into the entire 25 year project, he adds.

The project is advancing on schedule. Marine construction, dredging and offshore operations will be completed by the end of June, says Churchill: “We need to be out of the ocean by the winter.” Onshore, the microfiltration structure and the main reverse osmosis building are well into construction. From July the electrical and mechanical teams will move onto the site, building up to a complement of around 650 people. “The target date for completion of the 50 gigalitre plant is November 2011, including six months’ commissioning. All the integrating projects are on schedule too—we won’t have a desalination plant without power or pipelines!”

The announcement of the desalination plant, like others around Australia, was tied to renewable energy.

The Water Corporation is sourcing a suitable renewable energy supplier. The impact on the environment of the SSDP is being monitored closely—the Water Corporation implemented the most intensive ocean monitoring programme of any desalination plant in the world at its Kwinana plant and the new one will mirror that; though its design means the impact should be even lower. The earlier plant discharges brine into Cockburn Sound, a 100 square kilometre bay enclosed by a string of islands and with a very sensitive marine ecosystem including rare sea grasses. “There was concern that the heavier saline water would sit at the bottom, and the oxygen levels drop and affect marine life. The extensive monitoring regime strongly suggests that this has not been the case.”

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Wa t e r C o r p o ra t i o n : S o u t h e r n S e awa t e r D e s a l i n a t i o n P l a n t

Chemical Process Piping Pvt. Ltd Chemical Process Piping Pvt. Ltd (CPP) supplies GRP and thermoplastic lined GRP piping to the chemical and allied industries. It has recently supplied GRP/ FRP piping to desalination plants in the Middle East and South East Asia. A qualified vendor for GRP piping, CPP understands the importance of chemical resistance and has supplied piping for corrosive fluids at elevated temperatures.

The SSDP is on an open coast. “We are lucky to be in a very active part of the ocean—you don’t want reefs or critical habitats and there were no show stoppers there!” Churchill continues. “The impacts will be well managed. We have done extensive modelling to show that within 50 metres of our diffuser pipe we can achieve levels within one per cent of background salinity.” The main environmental issues on land are

associated with wetlands, clearing of vegetation, and protecting fauna, such as an endangered species of possum supported by that vegetation. Impacts have been avoided by routing pipes around wetlands and using already cleared areas wherever practical.

The biggest headaches are already over—marine blasting was kept to a minimum to avoid disturbing dolphins and whales. “We are in a whale migration area, so we could only blast between December and the end of April, and had to stop if whales or dolphins were seen nearby. During the dredging, when dolphins were seen in the area we stopped until they had passed by!” relates Churchill.

In the 25 year life of this plant, there can be little doubt that the sustainable water supply that the Water Corporation is creating in Western Australia today will certainly be replicated in other parts of the world that are not presently thought of as arid. www.watercorporation.com.au

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Mininga

fertile field

South African phosphate mining and processing group Foskor gave its name to foskorite—but ironically, it is no longer mining that ore as it refocuses its strategy and resources.

John O’Hanlon speaks to the VP of Mining, Johan Horn

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Foskor

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he macronutrients in fertilisers are nitrogen, phosphorus (in the form of phosphates) and potassium—usually described as NPK. World demographics and climate change mean that demand for these ingredients can only rise: the exponential growth in global food production sent the price of fertilisers skyrocketing in 2008 and it was feared there could be a world shortage of phosphate within decades.

All this gives South Africa’s only indigenous phosphate mining and processing company a sustainable future, both for the rock concentrate that Foskor mines and feeds to its processing plants and for the phosphoric acid and granular products it sells to the world fertiliser industry. However, the high prices that it was obtaining in 2008 slumped during 2009, says the company’s VP of Mining, Johan Horn. “At its peak we were getting $2,200 a tonne for the phosphoric acid produced at our Richards Bay facility. During the last year, that dropped to $450!” Recently world prices have risen, Horn says, and are currently at around $750 a tonne, but he’d be surprised to see prices anywhere near 2008 levels before 2011.

The divestment by South Africa’s national oil corporation Sasol of the phosphoric acid plant it ran in Phalaborwa close to Foskor’s mine and its closure in the latter part of 2009 was a blow to Foskor. This plant was its biggest external customer for phosphoritic rock, taking some 20 per cent of its entire production. It therefore made commercial and strategic sense for Foskor to buy the plant, and negotiations commenced; however, the national antitrust authorities blocked the sale. Sasol Nitro is in talks with other potential buyers, but for the time being this important resource remains closed.

The Phalaborwa plant consumed half a million tonnes of rock, but the good news is that Foskor has not needed to cut back production during the closure.

“We had almost completely run down our stockpiles last year, so our reaction to this situation has been to continue at capacity and build up our reserves to a comfortable level: when the plant comes back on-stream, we will be ready.”

In the medium to longer term, Foskor’s mining division will need to be able to supply even more milled rock than it does already. In order to be able to do this, it is in the process of commissioning a new mine to the south side of its existing pyroxenite deposit at a cost of R550 million (around $71 million).

Up until the present, Foskor has mined two distinct types of ore—pyroxenitic and foskoritic. The latter was first exploited by Foskor, which accounts for its name. The foskorite, though, accounts for only a small part of the huge deposits in the Phalaborwa region, though it contains other metals, including copper—which until very recently provided a separate revenue stream for the company—as well as magnetite, a source of iron ore. The pyroxenenes from the new south pit will yield greater quantities of phosphate per tonne mined, so it has been decided to focus entirely on pyroxenitic rock and discontinue the production of copper, which was in any case a marginal activity.

The South Phalaborwa Mine lies in the same geological complex as the existing North Phalaborwa pyroxenite mine. “The deposits are enormous, and this has the potential to grow into a very large open pit mine. We have already started production there and are currently ramping up operations with the eventual objective of deriving about 60 per cent of our feed from the south pit,” says Horn. The south pit material will be used to feed two of the company’s four production streams, the crushing and milling facilities at Phalaborwa mining company and the largest of the four flotation circuit that separate phosphates from other minerals in the ore.

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A side effect of the strategic Pyroxenite Expansion Projects (PEP), being overseen by Horn, will mean the end of foskorite, and by implication copper, production by the end of this year. “We don’t own any foskorite resources any more—there will be no copper revenues in the financial year 2010/11 and we have run down our foskoritic rock reserves and successfully changed over to pyroxenitic,” he asserts.

The big positive effect will be to increase the annual production of concentrate from 2.2 million to 2.6 million tonnes without any increase in processing capacity: it will be achieved simply through the higher yield from pyroxenitic feedstock, and this will more than compensate for the loss of the copper revenues, Horn affirms.

The South Pyroxenitic Mine is PEP Phase 1. Phase 2 is a project to remove a significant bottleneck that had arisen in the milling capacity at Phalaborwa. In 1999, a Loesche mill was commissioned with an annual capacity of 4.4 million tonnes. This was a vertical air swept table mill of a type successfully used in the cement industry, but it proved less successful than had

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been hoped in milling phosphoritic ore, says Horn.

It simply couldn’t feed the flotation capacity that the company has, so in October 2008 a series of conventional horizontal wet ball mills were commissioned to make up the shortfall. “We are in the process of installing milling capacity of 250 tonnes per hour,” Horn explains. The EPC contract was awarded to Bateman Engineering. “The project involves the design, supply and construction of a tertiary crushing, rod milling, ball milling, classification and flotation feed thickener circuit, fully integrated into the Extension 8 process facility to make use of the surplus flotation capacity the Loesche mill can’t feed.”

Horn is delighted with the progress by the contractor, which has shaved at least six months off the scheduled completion date: it ought to be on-stream by January 2011. That will enable the current year’s output target of 2.6 million tonnes to be increased to 2.85 million in 2011. “After that, we will engage in smaller debottlenecking projects and we think these will increase our overall output of

Foskor

phosphoritic ore concentrate to about three million tonnes per annum in 2012.”

Looking further forward, Horn says that Foskor’s strategy will be to achieve its annual production of diammonium and monoammonium phosphate of 4,000 tonnes. “After looking at further value-added products like purified or defluorinated acid, we may consider entering the retail NPK market, but that’s in the mid to long term,” he concludes.

Horn is one of nine members of the executive membership team led by the CEO and president of Foskor, Alfred Pitse. The political and economic landscape has changed significantly since Pitse took over the helm in June 2003. Despite the cyclical nature of the phosphate and fertiliser industry, Pitse has managed to turn Foskor around from a loss making entity.

In 2005 Foskor broke even after successive losses and in 2008/09 Foskor made record profits when operating profits increased by 149 per cent to

R2.7 billion from the previous year. Foskor expected much weaker performance in 2009/10 on the back of the second round effects of the global financial crisis. The appreciating rand hurt export earnings and commodities slumped from its 2008 peak.

Under Pitse’s stewardship, firm controls and prudent financial management enabled Foskor to make profits yet again, when at best, management was hoping for break-even due to hardening trade conditions.

Pitse reiterates: “I am exceptionally proud of my management team and the consistent successes they achieve. Mr Horn’s team have executed a R1.2 billion expansion project with military precision, despite the extraordinarily difficult environment we operate in.

PEP, to date, is running ahead of schedule and well below budget. Mr Horn’s passion and determination for delivery value is commended and he remains a true leader in the Mining Division and an example to the rest of Foskor.” www.foskor.co.za

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Un

As a commodity, gold has more than held its own throughout the recent economic turmoil, ensuring stability for gold producers worldwide. Andrew Pelis talks to one company hoping to see its current success continue, with projects in Papua New Guinea and beyond

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he search for gold has taken some interesting twists and turns in recent years, very much driven by demand as prices have overridden the global economic slump. Papua New Guinea is a prime example of a location where the term ‘driven’ has a double meaning for South Africa’s Harmony Gold.

“The country in many ways is under-developed, and we have had to implement all kinds of training,” acknowledges Greg Job, growth and resource development executive with Harmony Gold. “This has included using simulators to train local people, who may never have driven any kind of vehicle, to drive large lorries.”

For Harmony Gold, Papua New Guinea represents relatively new territory.

Founded in 1927 in South Africa, where it was named after the famous Harmony Mine, the company was first publicly listed in 1950 and is now visible on stock exchanges in Johannesburg (where it has its headquarters), London, New York and Brussels.

“Today we are a top-tier world gold producer and we are the eighth largest by production,” states Job. “We have 41,000 employees and a market capitalisation of US$4.5 billion. We operate gold mines in South Africa and Papua New Guinea that produce a combined 1.6 million ounces per year;

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Harmony Gold

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Harmony Gold

Bishop Brothers Engineering Bishop Brothers Engineering (BBE), located in the small and resource-rich country of Papua New Guinea, has been operating since 1972. BBE has always been involved in mining and exploration, and supplies industrial and engineering goods to many of the mines throughout PNG. It has been associated with Harmony Mine since its early exploration days and is its primary supplier of safety equipment and PPE. Specially manufactured clothing and footwear for the tropics has been developed and is proving to be a major cost saving factor, as well as contributing to Harmony’s excellent safety record.

Encouraging investment can be challenging, given the uncertainty of exploration work. “There might be a long time between investing money and seeing a return,” Job admits. “Exploration can be high risk in terms of success; but can generate very high rewards for a low level of investment. You may only discover significant ore every ten years.”

Even so, it is funding that enabled the acquisition of Hidden Valley, an open-pit, gold-silver mine and processing plant located in the Morobe Province of Papua New Guinea. The site is located approximately 210 kilometres north-west of Port Moresby, the capital of Papua New Guinea, and comes under the umbrella of Morobe Mining Joint Ventures—a 50:50 joint venture between Harmony Gold and the

“We operate gold mines in South Africa and Papua New Guinea that produce a combined 1.6 million ounces per year; and we are looking to increase productivity to 2.2 million ounces over the next couple of years” and we are looking to increase productivity to 2.2 million ounces over the next couple of years through increased production and starting new mines.”

At present, the company operates 27 shafts in South Africa as well as the Hidden Valley shaft in Papua New Guinea. “That site has a ten-year mine life at the moment but we are working on ways to expand that. The South African sites are nearer to thirty years,” Job explains.

Despite the challenges the global economic downturn has presented, Job feels that the gold industry has been relatively insulated by the demand for gold. “Gold has maintained its price so we’ve been fortunate not to be affected and we have not encountered any major problems operationally or in securing funds,” he states.

The company started out with a single shaft in South Africa and gradually increased in size through a series of acquisitions within the country, reaching a point where it was the fourth largest gold producer in the world. “As South Africa’s gold industry consolidated, the opportunities for acquisitions became thinner on the ground so we had a change of strategy and started to look at exploration,” explains Job. “This side of the business has ramped up slowly and we’ve gone from an AUS$8 million exploration budget to AUS$80 million this year.”

Australian company Newcrest Mining Limited.

The joint venture is undertaking extensive exploration activities in Morobe Province, targeting the Hidden Valley mine area, the Wafi-Golpu project and greenfield targets throughout Morobe Province.

“The Wafi-Golpu is definitely our good news story,” says Job. “When we took over the site from Abelle in 2003, there was just a small exploration camp in the mountains. We have now established a 1,000man camp and a mine that we hope will produce 280,000 ounces of gold this year.

“Papua New Guinea is renowned for its prospects; but the geology makes it difficult terrain given the lack of infrastructure,” he continues. “We had to build a road to begin with and secure various permits that required us to meet stringent environmental standards and hire a local workforce where possible.”

The real operational challenge, says Job, is to attract and retain quality people. “While the mining industry had a dip, it is very competitive again now and with so many physical challenges (due to the topology) you need good people on board,” he explains.

With commitments to hire local workers, Harmony Gold has embarked upon a series of training programmes aimed at developing skills. That is where the truck drivers come into play: “We’ve invested around AUS$1 million in a simulator to help teach local people how to

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Harmony Gold

Half Price Pallets With the latest technology at our manufacturing facilities and a team all working together, ½ Price Pallets is capable of producing large volumes of pallets with very short lead times.

We are very aware that conformance to customer requirements with regards to reliability, price and quality are the three most important ingredients in any business.

Half Price Pallets. Service you can rely on.

drive heavy vehicles. But safety is also one of our main focal points and we follow a central process that has been laid down by our head office,” Job comments.

In addition to its local training commitment, Job says that Harmony Gold also operates to global standards in consideration of the environment. “We are an international company and adhere to the Cyanide Code and gold quotas; within Papua New Guinea we are also the first gold company that has avoided dumping waste into the rivers.”

Social responsibility has clearly become an important part of Harmony Gold’s mantra. The company supports local health clinics and education programmes, with its commitments necessitating a 40-strong Community Affairs department. In South Africa, the company is also immersed in the country’s Black Economic Empowerment initiative. “We have been quite innovative and have entered into agreements with landowners, while our policy on procurement looks favourably on local suppliers,” Job explains.

As we speak, Job is in Brisbane, Australia, prompting the obvious question—whether Harmony Gold has designs on acquisitions in Australia’s gold-rich west?

“Not at the moment. We are using Australia as a base and we see south-east Asia as a growth area for the business.

We are looking at exploration in Papua New Guinea and the Philippines and will be undertaking pre-feasibility studies at Wafi-Golpu while the new business team concentrates on acquisitions in the area,” he confirms.

Ultimately though, Job says that the company needs to be mindful of any increases to its cost base.

“If gold prices drop, the cost base remains the same, so we are always striving for continuous improvement.

Part of this drive has been the introduction of a six sigma programme; and while this is in its formative phase, we hope that it will play a significant role in our future,” he concludes. www.harmony.co.za

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Simcoa Operations

astenot, wantnot Simcoa Operations is one of the world’s leading producers of silicon. Vice president Jim Brosnan tells Jane Bordenave how a dedication to efficiency and zero waste has helped it get there

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ounded in Western Australia in 1989 as part of the Barrack Group, Simcoa Operations did not have an easy birth. Almost immediately, the Barrack Group found it was laden with debt that it was struggling to service, due to the local financial situation around that time and depression in the silicon market caused by new silicon smelters in Brazil coming online. Shortly after that, the smelter and all its operations were taken over by a consortium of banks that had initially provided Barrack Group with funding for the project.

Despite this turbulence, Simcoa Operations did not crumble, instead becoming a profitable operation, which was assisted by its purchase in 1995 by ShinEtsu, a major Japanese chemical corporation and a leading

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Simcoa Operations

Tenova Pyromet The contract award to Tenova Pyromet for the design, supply, supervision and commissioning of the new submerged arc furnaces and bag filter plant for Simcoa is further recognition of Tenova Pyromet’s position as the world’s leading supplier of submerged arc furnaces to the ferroalloys industry.

The technology and experience from both Tenova Pyromet and Simcoa will ensure that the new silicon metal furnace at Simcoa will set the new benchmark for

silicon

metal

furnace

technology.

Tenova

Pyromet has recently successfully commissioned the largest silicon metal furnaces in China.

manufacturer of silicones, optical fibre and silicon wafers. The company itself produces some of the highest quality metallurgical grade silicon in the world, which is sold globally for the making of products such as microchips, aluminium alloys and bathroom sealants.

The company’s quartz mine is located roughly 170 kilometres north of Perth and, as well as mining the quartz, Simcoa Operations also operates a silicon smelter at its Kemerton site south of Perth to produce silicon from the quartz. “We use submerged arc furnaces to strip off oxygen from the quartz, leaving us with the silicon,” explains VP Jim Brosnan. “As the silicon-oxygen bond is one of the strongest in nature, the furnaces operate at temperatures of 3,000—4,000 degrees Celsius in order to cause the reaction. As you can imagine, the process is very energy-intensive.”

The process also requires other input materials, specifically charcoal, and the whole operation creates a range of by-products. However, the business does not treat this material as refuse, having a longstanding philosophy that ‘there is no such thing as waste’. A use is found for all of the incidental materials created during the production process— for example, silica fume, which is collected from the furnace off-gases during the smelting process and sold as an additive to strengthen concrete; and quartz too small to be used in the manufacturing process, which is sold to the construction industry for decorative use in concrete. As Brosnan says: “If you treat something as waste, you have to pay someone to get rid of it; but if you find a use for it, you get a return.”

In addition to finding uses for its own waste, the company also finds use for other people’s. “We actually produce our own charcoal, sourcing the raw materials from local sawmills or where land

is being cleared to make way for bauxite mining,” says Brosnan. “Once again, we find other uses for anything that doesn’t suit our needs or is a byproduct—such as for soil improvement or improving barbeque briquettes.”

This approach is driven by Simcoa Operations’ continuous strive for efficiency. It is the world’s most efficient silicon producer, having benchmarked itself over the years, firstly against its competitors and then itself, constantly pushing to reduce waste and improve efficiencies. “We don’t monitor what is happening in our business on a day-by-day basis as many other companies do,” explains Brosnan.

“Instead we have a constant data stream which we monitor on an hour-by-hour basis, showing us our rate of production, how our furnaces are running and constantly tweaking the way we are doing things.

This also helps us to see very quickly if there are any problems, or where improvements can be made.”

Having found a use for nearly all the physical ‘waste’ produced in the silicon manufacturing process, the next step is to recover the massive amounts of heat that are produced by the two furnaces, finding a way to turn it into energy for the site.

As well as stressing the importance of efficiency, the firm considers its people to be one of its greatest assets. When it celebrated its 20th anniversary in 2009, around 20 per cent of the staff were also celebrating 20 years of employment there. “Efficiency, training, housekeeping, safety—all these things are interlinked,” explains Brosnan. “Well-trained employees can help us identify potential efficiency savings and are less likely to have accidents at work, or to cause them, and so on.”

The training benefits enjoyed by employees is one feature that sets Simcoa Operations apart—as well as examining the jobs people are doing across the board to offer them relevant training, the company

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Simcoa Operations

has been working closely with a local technical college to develop a certified furnace operator course. These classes take a holistic approach to the student’s needs, including teaching modules that are not specific to silicon smelting, meaning the trainee will have a certificate that will be useful in their future career if they decide to move on. “We are also the only company in the region that still has a big sit-down dinner at Christmas, and we thank our employees for their contributions to our success in the form of gift vouchers for the local department store.”

Currently, the firm’s annual silicon output is 33,000 tonnes, produced by smelting 80,000 tonnes of quartz in two on-site furnaces. And the company has ambitious plans for further growth. “Demand for silicon is soaring, partly due to a general growth in the market, but largely because of the expanding fibreoptic and photovoltaic industries,” explains Brosnan.

To meet this increase in demand and boost output, the company is in the process of building a third furnace.

“This furnace will increase our output by 50 per cent, and there are some plans to increase it by 100 per cent.

However, we have been left in a kind of limbo by the new resources profit tax that will be coming into force on July 1, 2012. The rate of this new tax is 40 per cent, but as yet we are unsure how it will affect us, meaning our fourth furnace plan is currently on hold.”

In the future, as well as hopefully doubling capacity, the company is also considering the possibility in the longer term of diversifying into downstream processing. “Obviously there is an opportunity in the sale of downstream products, as it is a sector that is growing so quickly; so moving into that area ourselves is a logical next step for consideration,” says Brosnan.

With such a high profile in the industry, an ongoing drive for efficiency and evident care for its employees, one thing is certain—Simcoa Operations will be continuing to provide high quality silicon to make all our lives more technologically advanced for a long time to come. www.simcoa.com.au

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The goldenthre Dr Angus Hay, head of Technology with Neotel, South Africa’s first converged communications network operator, talks to Jayne Flannery about the golden thread of converged connectivity that runs through the company’s service offering

N

eotel’s head of Technology Dr Angus Hay sometimes likes to use the tagline “South Africa’s first converged communications network operator” to describe the company, which was launched in 2006.

“It is important that we define ourselves carefully,” he states. “We are an infrastructure based provider with a national network, but the real differentiator is our focus on delivering national and international services over fibre. At present we are the only IP player that is infrastructure based and making a direct fibre connection to customers, offering voice, corporate data and internet through a single connection. We may have a strong focus on IP for our services, but we go far beyond the internet.”

So Neotel provides everything from a telephone handset at home, to stateof-the-art data warehousing and transmission for some of Southern Africa’s largest companies. Other services include virtual private networks, hosting and satellite services. The company holds various telecommunications licenses as well as the Electronic Communication Network Service License.

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Neotel

ead

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Neotel

As a relative newcomer to South Africa’s telecommunications market, Neotel is unburdened by the outdated legacy technology that characterises older market players. Then there is the powerful advantage derived through a close relationship with India’s globally renowned Tata Group, which is Neotel’s largest shareholder with a 56 per cent holding. Tata Group is highly diversified, but as part of its communications portfolio, it is one of the world’s leading contenders in submarine fibre networks. Tata Communications is also a Tier One internet services provider operating on a global platform and carries the largest number of voice minutes of any international wholesale voice carrier.

“We benefit enormously from Tata Communications’ global communications network which in itself has a unique capability. Not only can we leverage a very powerful shareholder, but we can also integrate into its global network,” says Hay. The majority of Neotel’s revenue comes from corporate enterprise and wholesale services to other carriers, but the company also serves consumers and small businesses directly. The current infrastructure extends to a national optical fibre network that measures more than 10,000 kilometres, with a further 4,000 kilometres in major metropolitan centres.

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When it comes to state-of-the-art, metro ethernet services, Neotel is a leading provider and has the highest speed and performance service in the South African market, offering speeds of one gigabit per second which is on a par with the fastest services to be found anywhere in the world. It was also the first provider of metro ethernet in the market. “We run a DWDM optical transmission backbone,” Hay explains.

“On that backbone, we then have multiple circuits and offer an IP network on one side and synchronised digital transmission services on the other. We aim to provide as many corporate services as possible via fibre in preference to old-fashioned technologies.

We make no use of copper fibre, DSL, or any of the older voice technologies. Neotel places tremendous emphasis on delivery via optical fibres.”

For corporate clients, there is also the additional value of Neotels’ substantial data hosting capability.

One data centre in Johannesburg is already live and another one is due to go live very soon in Cape Town.

“It will give us a very substantial hosting capability that is connected not only to national networks, but also internationally,” he adds.

Drilling further down the customer base, some use is made of wireless platforms. The aim is to use a blend of technologies in line with the nature of demand, but Hay emphasises that Neotel would never want to be viewed purely as a mobile operator or restricted to any one activity. “The golden thread to all our services is the mix of services we offer down to our smallest customers who can take advantage of

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both high speed internet and voice services,” he says.

Hay wants Neotel to be seen as a company that challenges the established order and overturns the status quo. “We offer amazing data services, but we also offer tremendous savings and value for money in our voice services. We are not a mobile operator, but we can still offer the cheapest calls to mobile phones, for example. Previously there was limited competition in the voice market which meant high prices. Now that is no longer the case and we are very aggressively reducing prices.”

Meanwhile, Neotel is consolidating its first mover advantage. A new optical fibre loop is under construction as the company launches a fibre based broadband business direct to the building for corporate customers. “This will change the paradigm for broadband in South Africa,” he states. “At present no such service exists in South Africa but we firmly believe that fibre based broadband services must become the norm in future.”

Hay explains that as well as pioneering a new optical fibre infrastructure, Neotel was also the first telecommunications company to break the monopoly on South Africa’s submarine cable network. It is still the only player connected to all three existing submarine cable networks, as well as those that are planned in the future.

Neotel has invested R80 million into the Eastern Africa Submarine Cable System (EASSy) consortium— the cable goes live around August this year. Then in 2011, the West African Cable System (WACS) network

Neotel

Dimension Data Mayan Mathen, Dimension Data CTO, says the company has a strategic relationship with Neotel.

“The

relationship

allows

Neotel

to

take

next-

generation telecommunications services to market, through technologies which we design, build and manage, delivered over its high-speed connectivity.

These technologies are implemented in their worldclass data centres; for example, we provide session border controllers [SBC] for next-generation voice services. We are also the implementation partner, through Dimension Data subsidiary Plessey, for Neotel’s national network expansion through the national long distance fibre optic network project, of which it is a consortium partner,” he explains.

Dimension

Data

also

complements

Neotel

in

delivering networking and communications solutions to its enterprise clients.

goes live. The addition of EASSy in particular will significantly boost international bandwidth capacity and redundancy and increase internet connectivity competition in South Africa. “When we have access to five cables, we will look much more like Western Europe; and it will change the way South Africa integrates into the global internet,” he comments.

At present, Neotel is licensed only in South Africa and Hay does not envisage taking out further national licenses in the foreseeable future. However, he is committed to seeing Neotel leverage its optical fibre backbone to gain market share as a cross-border services provider within the wider SADC market.

“Our target market is very much Southern Africa, not South Africa; and we already have a number of very large clients in other countries using our services.

It is because we have taken such an active stance to connect to all the available networks that so many companies want to work with us,” he concludes. www.neotel.co.za

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A

flare for

innovat Process technology company Escher is building firm and longstanding relationships with the major oil and gas companies.

Managing director Yvo Jansen talks to Andrew Pelis about the company’s drive to innovate and expand into new markets

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tion

Escher Process Modules

A

s we switch on our showers and gas ovens, it is easy to forget the effort that goes into producing this vital resource. In recent years much has been made of the political issues regarding the transportation of gas via pipelines and across international borders. The once easily obtainable resources from the North Sea have been replaced by gas and oil fields in areas like Siberia and consequently, costs have increased.

Escher Process Modules, a company established in the Netherlands, is always looking for new ways to find alternative resources in the deeper oceans.

“Escher is a leading global process technology house and as such, we are the designer, contractor and supplier of process modules, process package units and flare systems for the oil, gas and petrochemical industries,” explains managing director Yvo Jansen.

“The key challenge our customers face today is still the effort and cost of gas exploration and production.

There is now a focus on exploration for gas as a standalone product—whereas before, gas would be found during oil exploration.

“At present we drill for gas in areas like Siberia in order to fulfil consumer needs and there is a tremendous drive for import,” he continues.

“However, we’ve seen the problems this can bring with costs and reliability. We need new ways to obtain gas in deeper sea which requires new technologies; and that is where Escher comes into the equation.”

Innovation and evolution have been carried out by Escher since 1925 and recent activities have simply continued the tradition. Escher was founded by Anne Escher, nephew of the famous graphic artist MC Escher, who built mechanical gas furnaces for industrial bread baking. Before long the company started to supply steel products and began to specialise in electric arc welding—a skill that culminated in the production of the first electric-welded hanging bridge in The Hague.

In the 1940s the company had opened a new workshop in The Hague and begun to produce specialised equipment for the petrochemical industry and half a century later, in partnership with Seamore Oil & Gas Processing (Netherlands), started to engineer and contract on turnkey process plants designed for oil and gas treatment.

“Around that time the big petrochemical companies had set up in the vicinity of Rotterdam and we started to manufacture pressure vessels and

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“Escher is a leading global process technology house and as such, we are the designer, contractor and supplier of process modules, process package units and flare systems for the oil, gas and petrochemical industries” heat exchange equipment and became renowned as a real fabrication workshop company,” states Jansen. “Growth in the 1990s saw us acquire Seamore in 1997, adding gas dehydration and glycol regeneration technology to our range of services.

Then we moved to Papendrecht and a site that gave us access to the open seas and bigger scope for a much bigger workshop.”

As the company’s capabilities expanded, so did its global reach; and in 2003, Escher was restructured to form Escher Process Equipment. Following the 2007 purchase of the business by consultancy and engineering firm Iv-Groep, a new management team came into the fold, including Yvo Jansen, to restructure and oversee the globalisation of the Escher brand name.

“Once the company had joined Iv-Groep of engineering expertise, the first focus was on investment in technology,” Jansen states. “Escher already had a strong reputation worldwide with the major oil and gas companies but our task was to enable the transition from a fabricator of equipment to process technology house and to create an engineering and contracting company.

“We felt that to be the best, you have to talk to the oil and gas companies and the leading universities to discover who the best young engineering prospects are.

We did this and brought new blood into our company to help establish our research and development for flare systems and process technology.”

Jansen says that training is a continuous process at the company. “There is constant on-the-job training

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and we fly our people around the world to work with our clients and learn about their operational issues, whether that is a site in the Caspian Sea, Persian Gulf, onshore in The Netherlands or an offshore facility in the North Sea. The investment has paid off and since last year we have been the leader in the area of flares when it comes to technology,” he continues.

Consequently, the company was selected by operating companies such as BP for its gas dehydration technology; and it has strong relationships with oil and gas companies around the world including Shell, Saudi Aramco, Qatar Petroleum, Kuwait Oil and Petronas.

The last of those names suggests a strategic reason behind Escher’s opening of a subsidiary in Kuala Lumpur, Malaysia, earlier this year. “We also needed a focus on the Middle East and Far East to develop local know-how to a higher level. We can undertake basic engineering and technology in The Netherlands but we want a closer relationship with our clients in that part of the world.

“We have fifteen engineers there and our aim is to strengthen that office over the coming months; the cost will be absorbed within Iv-Groep and we are confident that we will see a return on that investment by the end of this year,” Jansen explains.

With a commitment to R&D (last year the company spent in excess of 10 per cent of revenue), the danger is always that quality is lost at the production stage.

However, Jansen dispels any fears, indicating that Escher sets targets that exceed ISO standards.

Escher Process Modules

I-Deal MultiMedia I-Deal

MultiMedia

is

a

Dutch

based

company

specialising in film and photography for the oil and gas industry. We have over 25 years’ experience in the production of a wide range of films such as: corporate movies, recording of construction processes, HSE instruction programmes and CompanyClips®. When working offshore our crews are fully Nogepa 0.5 / BOSIET certified.

“Quality to us is when you meet client satisfaction and we always measure our on-time delivery performance (which requires a focus on each engineering document) and we measure all of the changes on every engineering project. Safety of course is another area we measure (including in the design phase) and we also set quality control measurements.”

Jansen is in no doubt that the future will continue to

throw up new challenges. “Each project we work on is different, with different gas composition, and each facility needs a different safeguarding system. There are new requirements within the oil and gas industries, which are very focused on renewables and reducing emissions. These require adaptation of existing technologies so it is essential that we work with the end users to help achieve the best outcome for them.

“Clients have to understand that the cheapest and most efficient way to reduce cost does not always deliver the best solution from a total cost of ownership and sustainability point of view.”

Given present-day market volatility, Jansen says Escher reviews its future almost every week but has three long-term strategies. “We must continue our internationalisation—next year we aim to enter the North and South American markets; our innovation must continue to evolve and to develop new ways to reduce emissions; and lastly, we want to increase the quality of the company.” www.escher.nl

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Last year, international exploration and development company Tullow Oil discovered significant oil resources in the environmentally sensitive remoteness of East Africa. General manager Dr Brian Glover talks to Gay Sutton about the importance of this discovery, and the challenges it presents

D

iscovering the first oil reserves deep in the heart of equatorial East Africa not only presents enormous business opportunities for the oil industry and the people of East Africa, it also brings a unique set of responsibilities and challenges. Last year, just three years after initiating exploration in Uganda, Tullow Oil hit the jackpot. Twenty-eight of 29 exploratory wells drilled over a two month period encountered oil and gas.

Headquartered in London, Tullow is one of Europe’s largest independent oil and gas exploration and production companies, owning over 85 licences in 22 countries worldwide and producing oil in eight. The current focus for operational activity, however, is very much on Africa, where the company

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Threeways Shipping Services Threeways Shipping Services and Transtrac are sister companies founded and based in Uganda, with world class corporate services specially customised for the oil development and other projects in East Africa. Together, they control a 120-strong fleet of brand new trucks and specialised equipment, with over 400 professional indigenous staff purposely developed and groomed for project logistical support in East Africa.

Equator Catering At Equator Catering we pride ourselves in providing solutions tailored to our clients’ needs while taking special care to protect the area we are located in.

The growth of the local community in tandem with oil exploration is vital; and our association with Tullow Oil has encouraged us not only to expand and develop our business but to also encompass the local communities we work with.

has a presence in some 15 countries. “There are two key projects for us in Africa at present. One is in Ghana, and this will realise oil by the end of the year. The second is Uganda, and this has gone from being a twinkle in the company’s eye in 2006 to a significant opportunity,” explains general manager Dr Brian Glover. The breakthrough came in January and February 2009, “which is when we realised that we were dealing with a very large oil deposit—probably in the order of two billion barrels.”

These discoveries were made across three licence

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Strategic Logistics

Civicon

We are proud to be associated with Tullow Oil. Our

Civicon is East Africa’s turnkey expert, offering

belief in the future for oil in Uganda is supported

a wide range of services. Our expertise and

by our investment in materials, equipment and the

experience across Africa in the petroleum industry,

training and development of our Ugandan staff, to

as well as in the areas of transport, road works,

whom we have pledged the future of our business.

crane services and trailer building, is second to

We thank Tullow Oil for the business opportunities

none. As Tullow Oil’s mechanical contractor, Civicon

and the Government of Uganda for creating and

has provided the company with a complete scope of

sustaining an amenable business climate.

services and solutions.

blocks on the shores of Lake Albert, one of which Tullow owns completely. The others are shared 50/50 with operating partner Heritage Oil. The discovery of such a significant deposit presented Tullow with a delicious dilemma—how to develop the prospect in the most efficient and effective manner.

Tullow’s strategy going forward was to seek partners who would not only be active from the financial perspective but who would also bring technological expertise to complement Tullow’s own. The company was also presented with an opportunity to acquire all Heritage’s interests in the licence blocks. The sale, which has government approval and now only requires Heritage’s tax issues to be resolved, is expected any time. Meanwhile, partnership agreements are close to completion with two global giants: the French oil company Total and the Chinese National Offshore Oil Company, or CNOOC. “It’s then a matter of mapping the expertise of the companies to the development needs, and identifying the role each of us will play,” Glover says. Tullow, for example, brings expertise in exploration and appraisal, CNOOC in pipeline laying and Total in project development.

Tullow’s vision is to develop Uganda as a hub for oil exploration, development and distribution in East Africa, with pipelines reaching north to southern Sudan, west into the Democratic Republic of Congo, south to Rwanda and Burundi and east to Tanzania and Kenya. The opportunities for Tullow and for East Africa are enormous.

The task ahead, though, is likely to present many challenges. Lake Albert lies in an isolated area some 1,300 kilometres away from the coastline of Africa.

“And if I can quote one of my colleagues: this is like a big logistics project with some oil at the end of it. It’s an enormous challenge.”

During the development stage, the company will be moving some one million tonnes of material and

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equipment into Uganda. In some areas, tarmac roads simply do not exist, so the roads will need to be constructed or upgraded, while the railway line from Mombasa is also in poor shape, and will need to be assessed as a method of transportation before being upgraded. “We are also talking with the Government of Uganda about the need for a new airport for the region, perhaps near to Masindi or Hoima,” Glover continues. “This will be essential not only for moving materials and equipment, but also transporting the significant number of people who will come to work on the development and subsequent facilities, and bring in their expertise.”

The improvements in infrastructure will also do much for the region, firstly by supporting the growing oil industry, and secondly by enabling the development of a more formalised business and social structure, including the possibility of developing tourism as a trade. “We have received an excellent response from the Government, and commitment that the infrastructure will be in place, on time.”

One of the biggest challenges of operating an oil company in Africa, however, is environmental. “And we have some of the most sensitive areas you could imagine working in,” says Glover. “Around Lake Albert we are operating in the Kabwoya Wildlife Reserve, and in the Murchison Falls National Park—a wonderful fenceless wilderness with an abundance of wildlife, notably elephants, giraffe, lions and hippos.

Our big challenge at the moment is to put together a sustainable plan not only to protect and preserve the wildlife, but also to give it the freedom to roam the areas where we are working.”

Much of this work is being undertaken in conjunction with key authorities including the Uganda Wildlife Authority (UWA) and selected international experts.

One key element will be the establishment of a fund to enhance UWA’s environmental management of the area.

In common with most oil companies, Tullow has rigorous policies concerning corporate social responsibility—or CSR, which Tullow refers to as ‘social enterprise’. It has been engaged in building or upgrading schools, health centres and hospitals, and works with local and international NGOs across a wide range of health, environmental, education and social enterprise initiatives. Before Tullow’s arrival, the region had no roads, communities were isolated and fishing was the main form of employment in a subsistence existence. Today, the company is assisting in setting up markets for the purchasing and selling of goods. “We’re providing the roads and

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communication. Today, mobile phones are owned by everyone in the valley where we work: it is their means of doing business. Our activities in the Valley are creating vast investment opportunities that will spur vibrant economic activity for the local communities and entrepreneurs. It’s quite a remarkable change.”

Glover believes very strongly that it is essential to engage with the local communities at all levels, all the way through the development programme. And this involves two major elements: firstly educating and informing them about the changes that are likely to occur as development progresses. “But most importantly, it is to support them as a community,” he says.

One initiative that Glover is very proud of is the establishment of a highly successful and popular beekeeping cooperative which after just two years includes some 200 farmers and a long waiting list of those interested in joining. The company also trains and employs local people wherever possible. “Our vision is to ensure that for every dollar we’re putting

into communities, as much of that as possible stays in the local area. And I would like to think that many of the local people who have come to work for us will move on to more senior posts within Tullow Uganda.”

Tullow Uganda’s community investment and programmes have not gone unnoticed. In May 2010, against very strong competition, the company’s KaisoTonya Programme won the award for Most Scalable Community Investment. This award recognises ‘best in class’ community investment projects in East Africa.

The company was also nominated in June 2010 for the prestigious African Business Awards organised

by African Business magazine in conjunction with the Commonwealth Business Council in London.

It is clear that the discovery of oil in Uganda is not the end point, but just the beginning of an exciting programme of exploration and development.

Meanwhile, for the nations of East Africa, the presence of the oil industry could herald a step change in prosperity. www.tullowoil.com

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