TradeInvest Africa (Cape Town)
Miles Donohoe
26 January 2009
interview
UK engineering, construction and management consultancy, Mott MacDonald, has a history stretching back more than a hundred years. In January 2006 the group opened an office in South Africa, following twenty years of working in the country.
TradeInvestSA's Editor, Miles Donohoe, spoke to Howard Bate, managing director of the group's South African operations, about the company's plans to expand further into Africa and his outlook for the engineering industry in light of the challenging financial climate.
How long has Mott MacDonald been operating in Africa and what was your reason for only recently formally opening an office in SA?
The company's first African project was the Aswan Dam around a hundred years ago. We've been in South Africa for the last twenty years doing various projects, but formally set ourselves up in 2006 after we won a project as part of a joint venture with Transnet. That spring-boarded us into the country because it was such a huge project, working on nine ports and 2,000km of railway line.
Do you see South Africa as a gateway into the rest of Southern Africa?
Absolutely; much of the development in South Africa occurred a long time ago - there was a pause in investment for about twenty years - and I think the recent spurt in investment has just highlighted the fact that the neighbouring countries do need some major support as well.
South Africa is reasonably well developed, so from that point of view it seemed like a natural progression to springboard us into Southern Africa.
Do you think a resolution in Zimbabwe will have an immediate positive effect on neighbouring southern Africa in terms of investment?
The investment is lined up to go into Zimbabwe; I think releasing the political situation that's there at the moment would see many companies from South Africa and from the UK diving in to support the country.
What's fascinating about Zimbabwe is that the education has been superb, so from our point of view you have fantastic engineers already working in South Africa that are very keen to go back to their motherland. So I think you'd also see a transition of people going back from South Africa into Zimbabwe, which would be a lovely thing to see.
How have you found working in South Africa compared with other developing markets?
South Africa, having been wealthy some twenty years ago due to gold and other minerals, already had an infrastructure that has been maintained. So when one arrives in South Africa, barring the heightened awareness of security, you could be in any other European country.
From a business point of view there are slightly different angles. South Africa is unique with its black empowerment rules, and certainly for a new company coming on board, especially a global company such as ours, that initially looked quite a challenging prospect. However, we already deliver three quarters of the criteria on black empowerment naturally in our business.
For us coming in it wasn't difficult at all, because as we go to countries we make our business local, so therefore the concept of empowerment was actually a very good model that we naturally apply around the world.
Are there difficulties that you have faced specific to South Africa?
The power cuts and power shortages. It hasn't really affected our offices because we have a generator, but the impact on projects is enormous, and I think not having a sensible power supply stifles the growth of South Africa.
You work in both the public and private sector. Are there any major differences between the two?
I think what's certainly evident is that in terms of the private sector, their approach and understanding of where they want to spend their money is very clear. I think the public sector still has a long way to go in appropriately identifying where funding should be placed, and the process by which that should be done smoothly.
You've been involved in the construction of the Mbombela stadium and Durban Harbour. What other projects are you working on in South Africa?
We've been working on schemes in both health and education. In our education division we are working in 600 disadvantaged schools in Limpopo, to help improve education infrastructure. Image of Durban Harbour
Likewise within our health division, we have been working with aid-funded schemes. The HIV scheme that we've been working on is a £30m programme helping 150 NGO's to improve their facilities and capabilities in supporting HIV sufferers.
Another area we're looking to expand into is telecommunications, which we are currently working on with MTN, Smile and Nedbank. We are also heavily engaged in water and energy as well.
Can you explain more about the telecoms project that you are working on?
We are working with Smile, which has been set up by MTN, to try and bring simple affordable communications to some of the world's poorest people. We've helped them put the project together, utilising new technology which actually makes it cheaper to use a mobile phone service, for people that can't normally afford to.
We've been involved from the early stages, working on the business plan, securing funding, procuring the network system and licensing, and it's now being rolled out across Africa. It won't come to South Africa for a while, but we're working in other African countries at the moment.
Have you noticed that the global downturn has had an affect on major projects already?
I think the reality is that on a lot of these major projects there is funding that is needed. There is a certain amount of government funding, and there's also a certain amount of funding that may come from outside of South Africa. With the worldwide credit crunch, getting money is more expensive, and so investors are being more selective. South Africa will not be removed from the credit crunch, albeit from a banking point of view, they escaped. But from an investment point of view, I think they will be affected.
How do you view the short to medium term for the engineering industry?
On the large-scale infrastructure side, one will see a gradual slowdown, simply because of the difficulties in getting major funding for these schemes. From a governmental point of view we'll probably have a year globally where things will slow, but I think it'll be the year after where most companies will see their order books not being replenished as well as they did in 2008.
The construction industry is so diverse. The global property market is in trouble because it got overheated, so in areas such as that, things are going to hit pretty hard. But in other areas I think it'll be a slow burn.
In 12 months time we may see a a lot of companies become slightly smaller, reflecting how many new projects are coming through, and how companies are filling - or not refilling - their order books.
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