GENREC
GENREC
SPG to
Revitalise Genrec PRODUCTION: Karl Pietersen
Since taking control of Genrec in May 2018, Southern Palace Group has started a revitalisation programme which will see the company re-emerge as one of the continent’s leading heavy engineering industry players, while simultaneously putting emphasis on diversifying its product offerings. www.enterprise-africa.net / 3
INDUSTRY FOCUS: ENGINEERING
//
Genrec, South Africa’s industry-leading ultra-heavy steel engineering business, has been recast in a new light since a change in ownership. Formerly owned by Murray & Roberts, this expert steel manufacturing and fabrication organisation had become stale, facing cashflow challenges and realising that customers were turning their backs in favour of competitors. In May 2018, black-owned and managed South African group Southern Palace Group (SPG) took full control of Genrec and quickly went about breathing new life into the mighty business. “This acquisition is a continuation of Southern Palace’s strategy to be a leading, black-owned, industrial operating company particularly in the infrastructure, mining services and value-added steel manufacturing industries,” said SPG CEO Lucas Tseki. “Steel is in the fabric of SPG, with the Group having been involved in the
Medupi Power Station
4 / www.enterprise-africa.net
steel services business as an investor for the past 15 years. It is important for us to leverage this heritage, the experience we’ve gained over the years and to tap into the vast networks and connections we’ve built up, in order to grow Genrec in South Africa and the rest of the continent. “We plan to diversify the current Genrec product offering to become a significant steel provider for infrastructure developments in energy, water, mining, health, education and transport sectors,” added Tseki. The deal, reportedly worth R185 million, was concluded with the hope that Genrec could gain further access to South Africa’s public sector contracts, as well as achieving expansion ambitions on the continent. To find out more about what the future holds for this highly-regarded organisation, Enterprise Africa speaks to Genrec’s new Head of Legal, Governance, Corporate Affairs and Compliance, Mkhabela Sibeko who
// THE NEW LEADERSHIP IS STRIKING THE RIGHT CHORDS, MAKING THE RIGHT NOISES FOR INVESTORS, AND THERE SEEMS TO BE A COMMITMENT TO TURNING THINGS AROUND // explains that now is an exciting time. “Everything is exciting, everyday there are new challenges, but everything gives you the feeling that this new animal will wake up in the not too distant future. “We think we have the necessary gravitas as Genrec to proactively understand what the market wants and accordingly deliver products and services that respond to those
GENREC
demands. I am confident that SPG is up to the challenge. “When SPG took over Genrec, Genrec was already a continental player in steel fabrication and manufacturing, and we want to maintain that. We have already been a part of iconic projects in Dubai and we believe we can become an international player in steel fabrication,” he said. M&R TO SPG Genrec was the latest company to be transferred out of Murray & Roberts in a swathe of sell offs that tie back to collusion allegations in the run up to the 2010 FIFA World Cup in South Africa. “A lot of construction companies went through a difficult patch post 2010,” explains Sibeko. “There were a lot of competition commission enquiries and many were accused of collusion
on pricing. This brought about a situation where it suddenly became less attractive to operate in the construction space. Subsequently, Murray & Roberts decided to sell its construction wing, Concor, to SPG. “After that, discussions started to also bring on board the steel and engineering side of things, Genrec, which was wholly-owned by Murray and Roberts. As of 1 May, SPG took over Genrec and it is now registered as Energy Fabrication (Pty) Ltd but we have kept the name Genrec as it still retains a favourable reputation and we didn’t want to make a wholesale change. Today, we are a 100% SPG owned subsidiary.” And since SPG took the business, change has been swift. New divisions and new product offerings have been added to the Genrec portfolio, and the company has gone back to its central
offerings to ensure quality is at the core of everything it does. “It does feel like we are in a completely new environment,” says Sibeko. “There is new leadership, the ethos of this leadership differs fundamentally from the previous leadership, but in essence we remain a company whose people are united in rallying behind the new owners. At the same time, we accept we have come into an environment where there was an existing culture and we respect that. We will be changing by introducing new aspects to the business, but we will retain aspects that have given us a competitive edge.” He describes the current situation at Genrec as a “new dawn” and says that the fresh energy being pumped into the business will help to revitalise relationships with all stakeholders.
www.enterprise-africa.net / 5
INDUSTRY FOCUS: ENGINEERING
“I recently returned from a trip to Australia where I attended an annual gathering of Australian mining houses where they were looking at opportunities in Africa. There were companies there with whom Genrec had done business before but the relationship had broken down. We went back to them and said ‘we are open for business’. One of the companies, in the trucking industry, has since approached us and said they want us to build and assemble chassis for their clients in Japan and New Zealand. Subsequently, they also asked us to work on a number of trucks for their big client in Ghana and then they asked us if we would take a license for them and set up distribution points in South Africa so that spare parts are easily available locally. If there was any doubt that the future looks promising, the endorsement from this Australian company shows that there is a need for our services.” He also describes a situation where
6 / www.enterprise-africa.net
// WE WILL BE CHANGING BY INTRODUCING NEW ASPECTS TO THE BUSINESS, BUT WE WILL RETAIN ASPECTS THAT HAVE GIVEN US A COMPETITIVE EDGE // a South African company, previously a client, had become unnecessarily alienated. The new leadership was quick to refresh the relationship and rebuild bridges. “There is a local company which makes big trucks to take products underground. We said to them ‘we are a new company, please come on board’, they responded positively and our relationship is now flourishing. There was also another company in Australia which had turned its back on us, but we said to them ‘we are a new and changed company’ and they knew that the steel and fabrication work which came from Genrec was top quality. We went back to the customer and said ‘we want your business, give us a chance’ and they agreed.”
Clearly, SPG sees huge potential for Genrec and is doing everything it can to re-forge relationships so that quality service delivery can resume. However, not everything is changing. Genrec has been recognised as a leading industry player for decades and there are elements of the business that will continue to drive this reputation. “It’s an acceptable norm in commerce and industry that when there is change in leadership, there is some culture shift. The new leadership always comes with their own ethos and idiosyncrasies,” explains Sibeko. “Having said that, there is the old adage which says ‘if it isn’t broken, don’t fix it’ and we agree with that. Elements of this business, like the machining side of
GENREC
things or the fabrication department, remain very competitive, so those things will not be changed.” NEW PRODUCTS Displaying ambition and enthusiasm for the future of not only Genrec but also South Africa as a whole, SPG has stated that it will install various new offerings into the Genrec stable. Recognising its already sterling portfolio but realising the opportunities for expansion, SPG management is innovative in its approach. “We have introduced a division called Energy and Transportation which we hope will play in the newly created space following the signing of the independent power producer agreements, where we want to work with windmills, turbines and solar energy,” details Sibeko. “We have also introduced a mining robotics product offering,” he adds. “That is going to address specifically issues around mine safety. It is an open secret that around 70 people have died in the mines this year. The robotics that we hope to introduce will go a long way towards decreasing fatalities underground because it will be machines extracting the reef rather than people. Of course, that will have implications around job losses – automation is always associated with people being laid off – but the emphasis is going to be put on creating industries that can improve beneficiation. It is true that with automation, people may be laid off, but we will be creating new jobs in the beneficiation space and other secondary industries.” POWERFUL BUSINESS Currently, major projects underway at Genrec include those at Kusile and Medupi, where the company has been on site for many years. Medupi and Kusile are flagship projects for Genrec and for South Africa and are recognised as some of the largest construction projects in the southern hemisphere. Genrec was the lead contractor for all of the site’s steel structures and was also
A PRECISION MANUFACTURING ENGINEERING WORKS. SUPPLYING THE AFRICAN MARKET.
www.mentis.co.za | sales@mentis.co.za Head Office - Johannesburg, 147 North Reef Rd, Activia Park, Elandsfontien Tel: 011 255-3200 | Fax: 011 828 0743
involved in project management, site support, erection planning, boiler unit fabrication and conveyor manufacture. “At Kusile, we were supposed to have started with the demobilisation process but the latest is that we will only start with that process in December,” admits Sibeko. “At Medupi, we have a partnership with Mitsubishi Hitachi and they have asked us to remain on site as there is still a need for our expertise. Right now, we have people on site at both power stations and there is a good chance that we will still be on site into the second half of next year at Medupi.” Upon completion, Genrec will have been one of the most heavily involved contractors in the history of the Medupi and Kusile build and Sibeko is proud of the company’s achievement. He says that today the company remains the industry leader in heavy engineering
for the energy sector and the company has its sights on the pole position across all spaces. “When it comes to projects in power stations and mines, we retain uncontested industry leader status. However, when it comes to smaller projects, there is heavy competition. We have had to adjust our own pricing in order to be competitive.” Demonstrating the company’s ability to quickly and easily move across border, Sibeko highlights recent work in Namibia as some of the company’s most important. “Another important project for us recently was a bridge construction project in Namibia. It is now completed and everyone is happy. Given the quality of workmanship that went into building that bridge, we believe that will open a host of other opportunities.”
www.enterprise-africa.net / 7
INDUSTRY FOCUS: ENGINEERING
// IT IS VITAL THAT WE DON’T KILL OUR LOCAL INDUSTRIES AND WE CANNOT ALLOW FOREIGN PLAYERS TO PUSH LOCAL INDUSTRIES OUT OF EXISTENCE // In Africa, Genrec has identified Zimbabwe as a market which holds major opportunity. “We are very interested in Zimbabwe and the country’s emerging mining industry,” says Sibeko. “With the new dawn in Zimbabwe since the change in leadership, Zimbabwe is now open for business and they are going back and revising legislation that limited investors. Zimbabwe is now investor friendly and, given their mineral resources, we would like to enter that market.” Across all of its geographic targets, Genrec will bring expertise in mining, infrastructure, energy, health, education and transportation, and Sibeko says that rail in particular is an interesting industry. “We are interested in the mining industry as well as the rail infrastructure and rolling stock sector. We hope that this will be a development across the
8 / www.enterprise-africa.net
length and breadth of Africa – countries such as Mozambique and Angola have a real need for the refurbishment of their rail infrastructure and we are positioned to enter that space.” STRONG FUTURE Since the acquisition of Genrec by SPG, a future-focus has been instilled by the new leadership team. By recognising the company’s strengths from history, Genrec is positioning itself for a strong future. This steely, experienced, and skilled business is now ready to embrace a new direction as the continent’s go to steel fabrication specialist. However, there is a large hurdle for the new Genrec to overcome – the unpredictable South African economy. Recently entering technical recession, the backdrop for Genrec’s rebirth is not pretty, but Sibeko remains confident.
“The many challenges that we have experienced, including downgrading, were a function of the previous administration which weakened good governance at state-owned enterprises, weakened revenue collection capacity at the SARS, weakened the criminal justice system, and marginalised hardworking South Africans,” he says. “However, with the changes that came in December last year, the tide has started to turn around. Good governance is now at the top of the priority list with the current administration. We have seen this with changes to the Boards of major parastatals. For me, that shows that the current administration cares about making South Africa an investor-friendly country again. The recently announced recession is a function of all that was bad with the previous administration.
GENREC
The new leadership is striking the right chords, making the right noises for investors, and there seems to be a commitment to turning things around. South Africa and South Africans are very resilient, and we are confident that things will change for the better.” As for the local steel industry, a vital component of Genrec’s past success, Sibeko admits that work is needed. “It would be an illusion on my part to say there are no challenges in the local industry but the government is aware of the need for locally manufactured steel,” he says. He suggests that support from government will be the key to reviving local steel manufacturing and says that as long as locally produced materials are cost-competitive, Genrec will always try and buy SA-made products. “In the textile industry, there was a set of measures and incentives introduced to encourage people to buy local and we believe the same will happen with steel. It is vital that
we don’t kill our local industries and we cannot allow foreign players to push local industries out of existence. Given our recent challenges with the economy, the government will respond and we are confident that mechanisms will be put up to mitigate against foreign pricing.” These short-term challenges, although inconvenient for Genrec, should be easily overcome with the correct intervention. Long-
term, Genrec’s new leadership will undoubtedly drive the business to exciting new heights. Just like it has done for 65 years, this South African institution will continue to build a stronger, tougher and greater country.
WWW.GENREC.CO.ZA
MEET SIMON MKHABELA SIBEKO – GENREC HEAD OF LEGAL, GOVERNANCE, CORPORATE AFFAIRS AND COMPLIANCE “I was previously a lawyer. I’ve been in the public sector, I’ve been in the private sector, I used to work in the mining industry, and I was in a private practice for the past seven years. I joined SPG at the end of March when I was approached and offered the opportunity to be part of an exciting team that wants to awaken a sleeping giant.”
www.enterprise-africa.net / 9
Published by CMB Media Group Chris Bolderstone – General Manager E. chris@cmb-media.co.uk Sackville Place, 44-48 Magdalen Street, Norwich, NR3 1JU T. +44 (0) 20 8123 7859 E. info@cmb-media.co.uk www.cmb-media.co.uk CMB Media Group does not accept responsibility for omissions or errors. The points of view expressed in articles by attributing writers and/ or in advertisements included in this magazine do not necessarily represent those of the publisher. Any resemblance to real persons, living or dead is purely coincidental. Whilst every effort is made to ensure the accuracy of the information contained within this magazine, no legal responsibility will be accepted by the publishers for loss arising from use of information published. All rights reserved. No part of this publication may be reproduced or stored in a retrievable system or transmitted in any form or by any means without the prior written consent of the publisher. Š CMB Media Group Ltd 2018
AS FEAT UR ED IN
ENTERPRISE AFRICA
O CTO BER 2018