ABB SA
ABB SOUTHERN AFRICA
Technology Focus Powers ABB’s
African Growth PRODUCTION: Manelesi Dumasi
With an extremely large installed base, all over the African continent, ABB remains a leading force in electrification, power, automation and related industries. The global pioneering technology business, through its local divisions, is sparking a revolution in rail, renewable energy, and utility supply security. Southern Africa CEO, Leon Viljoen tells us more.
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In 2014, ABB – the world’s leading technology and electrification company – announced its intention to launch a ‘Next Level strategy’ which would see the business accelerate sustainable value creation by building on three focus areas of profitable growth, relentless execution and business-
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led collaboration. The 2015-2020 strategy, according to ABB CEO Ulrich Spiesshofer, would help drive “organic growth momentum, margin accretion as well as enhanced capital efficiency to deliver greater shareholder value.” In 2016, after achieving much success with the new strategy, the business announced that it
would enter the third stage of implementation, involving a transition of the organisation towards being a pioneering technology business. “Over the last two years, ABB has become faster, leaner and more efficient,” said Spiesshofer in 2016. “We have continuously improved margins and further strengthened our cash
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INDUSTRY FOCUS: POWER & AUTOMATION
generation. In Stage 3 of our Next Level strategy, we are building on our successful transformation momentum and strengthening our position as a pioneering technology leader and global digital champion.” And in Southern Africa, a major market for ABB, this strategy has been welcomed. “With our move from being an engineering company to being a pioneering technology leader, there has been a change in focus for the group and I think that is the right direction for us to be going,” ABB Southern Africa CEO, Leon Viljoen tells Enterprise Africa. “We grew our regional business order intake and top line considerably in 2016 and 2017.” And the strategy is doing the job at global level, with the group reporting last month that revenues for
2017 were up by 1%, base orders were up by 5%, net income was up 17%, and strategic acquisitions were ongoing. “In the transition year 2017, we shaped a streamlined and strengthened ABB…
With our targeted actions to shift our center of gravity, we have improved competitiveness, addressed highergrowth segments and de-risked ABB. We delivered four consecutive quarters of increasing base-order growth,” said Spiesshofer. CONSISTENT BUSINESS Back in November 2015, Viljoen told Enterprise Africa that ABB SA’s more than 1000 employees were part of some of South Africa’s most important projects (Kusile power station and Venetia mine expansion), and today he says that those projects have been very successful and remain ongoing. “At Kusile we’ve completed the first two units on the control and instrumentation (C&I) side and we are busy with the third of six units. We’ve also completed the Balance of Plant (BoP) and we are now midway through the project in total,” he says. “At Venetia, we are still busy with the mine winders. All the designs have been completed and approved and the execution phase of the project is starting to kick off. “We’ve also gained a very big mine winder contract in Russia where we are the centre of the excellence for the mechanical part of the mine winder and ABB Sweden does the electrical side and together we won that big contract.
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ABB SOUTHERN AFRICA
// WHERE MANY COMPANIES MAKE HUGE MARKETING CAMPAIGNS ABOUT ENTERING AFRICA AND DOING THINGS, WE’VE ALREADY BEEN THERE FOR DECADES AND WE HAVE BUILT A GOOD CUSTOMER BASE // “We’ve been successful with ABB Sweden in a few different countries and our relationship is great. Being the centre of excellence on the mechanical side, wherever there are big projects of this nature, together with Sweden we are often successful,” he adds. With the restructuring of the global group strategy, the employee mix in Southern Africa has seen some changes and Viljoen explains that this has helped the business become more competitive. “In Southern Africa, our employee numbers remain the same or are slightly down from 2015 and the reason is that in South Africa, we’ve worked hard on white collar productivity – a programme that ABB has initiated globally – looking at our back offices and supporting staff and consolidating work in countries like India and Poland,” he says. “However, our sales and service complement has grown around Southern Africa,” he adds. “What we have done, specifically in South Africa, is diversify our customer base and one of the reasons for that is that political instability, in many countries, has impacted on us in a lot of instances in the past. Utility businesses are linked to government and if governments change then utility spending can stop. However, utility business will always remain a big portion of our supply. Utility business has helped us to get into other parts of the market and in the past we have done that very successfully.” ECONOMIC SPARK? The South African economy has been flirting with minimal economic
growth (GDP growth not exceeding 3% since 2011 according to Stats SA). Global credit rating agency decisions have been widely reported, political factors have caused havoc with currency pricing, and commodities have also contributed to an unstable environment. But this is where ABB’s international strength and presence across multiple local markets allows the business to be flexible and avoid potential problem situations. Viljoen says that gaining more long-term
maintenance business as well as retaining a strong presence in multiple locations allows the company to avoid regional slowdowns. “We need to increase the service portion of our income which will make us less exposed to political instability. We also look at each country in Southern Africa as one country from a financial perspective and ask where is the growth coming from – we know we won’t get growth in every country every year. As long as our combined order intake grows year-on-year, we are satisfied.” But economic instability that effects ABB’s customers is often unavoidable, and this is where ABB South Africa has felt the impact in recent times. In May 2017, ABB inaugurated its brand new, state-of-the-art
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INDUSTRY FOCUS: POWER & AUTOMATION
transformer traction production facility located next to its Longmeadow headquarters in Johannesburg. The facility was developed to serve the needs of South Africa’s rail industry expansion, specifically the needs of Transnet which ordered hundreds of new locomotives in a landmark contract back in 2014. ABB’s unit produces traction transformers to help power trains. They feed power at safe voltages to essential train functions like traction, brakes, lighting, heating and ventilation, as well as passenger information, signalling and communication. The factory is 2450 m2 and is an essential element in the construction of 240 Bombardier electric locomotives, satisfying the local manufacturing element of the South African government’s local
// WITH CYRIL RAMAPHOSA’S APPOINTMENT, THERE’S DEFINITELY A MORE POSITIVE FEELING IN BUSINESS IN SOUTH AFRICA // procurement and employment requirements. But, to date, the factory is not working to full capacity as Transnet has been faced with delays. “It has been a success story in terms of localising international technology into South Africa and Africa,” explains Viljoen. “Unfortunately, with Transnet delaying parts of the project, the factory is definitely not working at capacity. We are hoping to secure a couple of new orders to help the factory fill capacity but for me, it has been a success because of how easily we transferred the technology to South Africa. Our
first units went through without any glitch, and transformers are the pieces of electrical equipment that get the harshest tests before they leave the factory. Our units passed all tests on the first attempt but manufacturing has now slowed. At the moment we are waiting to see what will happen but we expect things to pick up towards the end of the year.” He confirms that the rail industry remains a key focus for ABB as it is a growing sector with many opportunities across many territories. “Zambia, Kenya and Tanzania are all in discussions about expanding their rail
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ABB SOUTHERN AFRICA
networks,” he says. Going forward, all opportunities for expansion will be considered but they must add to ABB’s already strong order intake. “We are really looking at growing our order intake and revenue – that is extremely important to me; a company that doesn’t grow is not sustainable,” details Viljoen. “We have six growth segments that we are targeting and we were successful in 2017 but we can improve in 2018. We are looking at large LNG projects in Uganda and we need to get further into the digitisation and the fourth industrial revolution where ABB has a lot of solutions that have been rolled out around the word.” POWERFUL EXPANSION In August 2017, ABB further solidified its position in Southern Africa with the opening of a new facility in Namibia. The 2200 m2, located in Windhoek, is the result of consolidating two smaller offices and is targeted with servicing the local market and neighbouring countries including Zambia and Angola. Viljoen is proud of the new facility and says it will help the business deliver on the vital service contracts that are making up an ever-increasing percentage of revenue. “We had two offices there, and that was basically a service company that ABB purchased many years ago but was never really consolidated so we decided to bring the two operations into one. We are targeting places like Zambia and Angola from Namibia as we have an extremely strong service component there. “We have also picked up some nice orders from the Port of Walvis where a Chinese company in building the port and we are offering local capabilities and expertise. “We’ve seen a shift in spending from Capex to Opex; that’s more maintaining of equipment to be sure that equipment works for longer. We saw, specifically in the mining sector
ABB SA CEO LEON VILJOEN
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INDUSTRY FOCUS: POWER & AUTOMATION
// I BELIEVE IT WON’T BE LONG BEFORE WE SEE MUCH BIGGER MICROGRIDS THAT INCORPORATE BATTERIES WHICH CAN STORE LARGE AMOUNTS OF ENERGY FOR WHEN THE SUN AND WIND DISAPPEAR // in the middle of last year, there was a huge downturn in capital expenditure but it returned slightly at the end of the year. With Cyril Ramaphosa’s appointment, there’s definitely a more positive feeling in business in South Africa. However, we definitely saw a lot of global companies holding back on Capex last year and that does affect us but fortunately we picked up enough business on the Opex side to maintain our growth.” Losing these Opex contracts
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to competitors is not an option for Viljoen and he is confident that ABB is the strongest player in the market in Southern Africa, thanks to its local knowledge and reach – most competitors are small local branches of international organisations. “For our Southern Africa market, our biggest competitors come from the East; that’s Chinese companies with Chinese funding,” he says. To shield itself from this type of threat, ABB SA partners with ABB China to try and benefit from the
Chinese funding to make sure that the company wins the projects, partnering with EPC’s coming into Africa. “We play across such a broad field that we will have competitors in various segments but we continue to be very successful in Africa.” A major factor not to be underestimated by international players entering Africa and looking to take market share from ABB is the history that ABB has built on the continent. It is rooted in Africa and has been a partner to utilities and other customers. “Last year, we celebrated being in Africa for 110 years and if you have a look at our offices in Southern Africa, not including South Africa, we have been in most of these countries for 20 or 30 years at least,” Viljoen highlights. “Where many companies make huge marketing campaigns about
ABB SOUTHERN AFRICA
// I WOULD DEFINITELY RATHER WORK IN ABB SOUTHERN AFRICA THAN ANYWHERE ELSE WHERE THERE IS NOT HUGE GROWTH //
entering Africa and doing things, we’ve already been there for decades and we have built a good customer base. We will be focussing on our service to grow our business
because we have built such a huge installed base over the years so it’s only right that we look at that base and ask what we can do from a maintenance/Opex perspective.”
AFRICAN PROJECTS ABB’s project pipeline in Africa is sizeable and current big-name projects include the installation of seven micro substations in the DRC. The partial upgrade of the IngaKolwezi high-voltage direct current (HVDC) power transmission link, which connects the power from the Inga hydropower station to the mining district of Katanga in the south-east of the country, was announced in May 2017 and was valued at an estimated $30 million. “We actually received a big order in the past year for further work on that project,” enthuses Viljoen. “That will probably be a two year contract surrounding the HVDC system. It’s the third similar system that we’ve worked on after the Songo-Apollo link which connects the Cohora Bassa dam in
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INDUSTRY FOCUS: POWER & AUTOMATION
Mozambique to South Africa and the Caprivi link which connects Namibia and Zambia.” The 1700 km link, built by ABB in 1982 and upgraded in 2009, is formerly
the world’s longest transmission line. The work currently being carried out by ABB will see a boost in transmission capacity, enhance grid reliability, extend life span and
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ensure the efficient transmission of hydro-electricity across the region. Transmission capacity will be almost doubled, from 520 MW to 1000 MW. With microgrids, ABB received international plaudits for its installation at Robben Island and the system installed at its Longmeadow head office. A microgrid is a small, self-contained network that serves a local area – ideal for a rural or difficult to reach location. “Microgrids hold huge potential for Africa – we’ve got plenty of sun here so from a renewable perspective, there’s a lot of opportunity. Our technology involves making sure that all your components seamlessly integrate into the network. In Kenya, we did a microgrid flywheel installation as the wind power was destabilising the network a lot. We also worked at the Red Cross in Kenya where we built a new microgrid. We are in talks with the mining community about installing microgrids and we are also developing smaller systems for industrial and small community use. “As long as there is sun, it will give you the energy you need. We installed a microgrid here at our head office just over a year ago and its running well giving us most of our power requirements when the sun is shining. That is the beauty of these renewable projects, you make an investment that pays back,” says Viljoen. Alongside microgrids, ABB SA is also working on new concepts such as the substation voltage transformer system, where smaller communities can draw from an electricity line without the need for a major, highly expensive substation. “We installed a couple of substation VTs in the DRC for SNEL and its to help where you have a highvoltage line between two points which goes over a village but doesn’t feed that village. To build a substation for a village makes no sense because of the price so we have developed what we call a substation voltage transformer
ABB SOUTHERN AFRICA
system that is a micro sub-station and that gives enough power to electrify a small community. This is a product that we are starting to roll out across Southern Africa.” With renewable energy gaining traction all over the world, Viljoen is confident that Africa will soon follow suit. The company’s microgrid systems and substation voltage transformer systems will be very important as new energy is fed into the grid. “I think there will definitely be more renewables,” he says. “I agree with Mr Ramaphosa that we can’t afford nuclear power and with the advances that have been made with battery technologies, I believe it won’t be long before we see much larger microgrids that incorporate batteries which can store large amounts of energy for when the sun and wind disappear.”
2018 AND BEYOND As well as driving the global strategy to unlock value and increase profitable growth, ABB South Africa will be looking to localise the company’s global expertise and create money saving opportunities for customers. “It’s an exciting time,” says Viljoen. “Africa is continually growing and there‘s lots of new opportunities for customers and for ABB. We have a lot of products and solutions that are very energy efficient so when it comes to making your operation more financially viable, this is definitely an area that we play in.” On a personal level, the CEO remains committed to the ABB project and is enthusiastic about the future of sub-Saharan Africa – a future that will undoubtedly realise major electrification and power possibilities.
“I’m enjoying it. I would definitely rather work in ABB Southern Africa than anywhere else where there is not huge growth. Working in Southern Africa is exciting; there are problems yes, but without challenges we wouldn’t have work,” he laughs. “ABB’s change in direction towards technology rather than purely engineering requires a change in mind-set and also a change in skillset so there is a lot to do to get the company to where we would like it to be,” he concludes.
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March 2018
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EXCLUSIVE INTERVIEW WITH ABB SA CEO LEON VILJOEN
Technology Focus Powers ABB’s African Growth ALSO IN THIS ISSUE:
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