Africa: Optimism & Opportunity Propel GE - Jay Ireland

Jay Ireland
23 October 2015
interview

New York — In Africa, there are few major American firms with as long a history of engagement as General Electric, which began operations in South Africa more than 100 years ago and has been expanding across the continent. During the U.S.-Africa Leaders Summit convened by President Obama in August 2014. GE announced plans to invest an additional $2 billion in facility development, skills training, and sustainability initiatives across Africa by 2018. In a September interview with AllAfrica's Reed Kramer, Jay Ireland, President and CEO of GE Africa, discussed how the company is implementing those expansion plans.

GE's largest operations in Africa are in three countries. Is that likely to be true as you expand across the continent?

In terms of revenue, our biggest are Nigeria, Angola, and South Africa. Those are the big three right now, and it's probably going to stay that way. Across Africa power generation is key, and it has huge potential. You can't do grow your economy or take care of your people without electricity. But we are expanding many other areas as well.

We have the largest of breadth of product in Nigeria, We're big in oil and gas, healthcare and power. We've put in a bunch of facilities – like the sub-sea wellhead fabricating plant in Rivers States - and we've expanded our footprint in Nigeria with power generation services. We are continuing to build our manufacturing and assembly plant in Calabar.

Across Africa power generation is key. You can't grow your economy or take care of your people without electricity.

In South Africa, we've launched our innovation center in Johannesburg. We are engaged in transportation, i.e. our locomotive business – we're assembling locally and supplying Transnet. We are in healthcare, and we will be big in the power sector once Alstom comes on board. [GE is acquiring the energy assets of the French power and transport engineering company.] After we finalize the Alstom deal, we'll be a significant supplier to Eskom, the main South African utility.

In Angola, we're in oil and gas and power and we're looking into healthcare. We're in the process of building a plant to supply sub-sea equipment to the oil and gas industry.

Looking at Nigeria, how would you rate the progress that is being made towards boosting power output and what about the natural gas that is needed to fuel much of the electricity generation?

I would say progress is ok. With the elections and the change in government, things slowed down a bit. Now that we have a government, things are moving ahead. The key in Nigeria is managing the fuel and the transmission. Generation [of power] is a key piece of it, but you have to have the other two sides as well. The Azura project has gotten approval - it's not one of ours, but that tested the concept of what they wanted to do with the privatization and what they wanted to do with the bulk traders. That seems to be progressing as well.In terms of getting gas from offshore to onshore, there are a number of pipelines. Part of the problem is pricing. I think the new government understands what the issues are and hopefully they'll address it.

Is healthcare a growth area for GE and what does GE do in that sector?

Yes, it's a growth area for us - everywhere. Everything we make and do helps Africa's infrastructure. Healthcare is big part of that. We do diagnostic imaging equipment. We do life sciences, which is some of the manufacturing equipment wrapped around drugs and vaccines. We also have a broad array of other products - monitoring, baby warmers and things like that.

Are your healthcare clients public and private?

Mostly public. The private sector isn't that well established, but it's getting better and better. That will depend on the health insurance that each country has and how they manage that.

How is GE expanding east Africa?

There's a big health care program we're doing in Kenya. We're outfitting 98 hospitals with diagnostic imaging equipment. We're also working on power generation, mostly renewables. We're in Ethiopia doing things there. We're in oil and gas equipment for Tanzania and in Mozambique, we're looking at all of the product lines. We have a broad array of product lines with all the countries.

What are the general prospects for renewables in Africa?

I'd say they are pretty high. You've got a great regime in South Africa around wind. I think they are on their fifth iteration of ask bids. There's an unbelievable capacity for wind in the Rift Valley in east Africa - some of the highest in the world. Solar has huge potential, as does hydro, which has been there for quite a while. In Kenya, thermal is there. With renewables is you've got to deal with land issues, and it's not as easy as people think. Those who own the land may not want a solar or wind facility. You have to work with local populations around access. How do you pay for it? How do you include them in the development? The other piece with renewables that makes it a little more difficult is the intermittency onto the grid. It's not windy all of the time, it's not sunny all of the time. The grid has to have the technology and the ability to handle that. Some of the grids don't have that capability, but as new investment comes in, we will see it more and more.

Is human capital still a major challenge?

We're investing a lot of money in developmental programs for people. This investment reaches wider than just GE employees. As we grow, we're going to need to match the human capital with the jobs that are out there so there is no mismatch. It takes time. It's a generational thing from the standpoint making sure kids get into schools, and their schools are good and they are continuing to grow. That's still always going to be out there. I don't think that's different from anywhere in the world at this point in time.

We doing curriculum development with a couple of universities in Mozambique. We're doing scholarships and investments with the African Leadership Academy, which is a secondary school in Johannesburg. We're going to be opening an engineering resource center in Ethiopia and in South Africa, which will focus on training engineers. We're doing a training center at Calabar Tech, investing in their equipment and updating their capability capacities. In Kenya we've just announced GE garages which we're going to do with a group there called Gearbox around advanced manufacturing.

What are other obstacles you're facing?

Timing - things take longer than they should, for a variety of reasons. It's a question of matching needs with products and with financing. Also making sure there's an adequate view of what the risk is - the perception of risk versus reality – and providing the enhancements and guarantees that people require. There's a lot of capital that wants to invest in Africa, but investors still want quite a high return. There's too often a mismatch that still needs to be addressed.

Projects take longer than they should and misperceptions about risk need to be addressed.

Do you see any increase in interest in Africa from American companies?

We're seeing a lot more interest. Since I arrived in Nairobi four and a half years ago, I'm seeing more companies locate regional headquarters in Africa instead of Dubai or London. I think that's going to continue. Companies are recognizing you have to be on the ground to succeed. With the price of commodities down, economies are slowing and that's across the world. But it's short term. We're looking at this over a long period of time. We feel good about the investments we've made. They are going to continue to add value to the company and to the African continent. We're optimistic.

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