Africa: Bechtel Offering 'Fast Track' Solutions for Large-Scale Projects Across the Continent

Photo: Bechtel
Andrew Patterson, Bechtel president for Africa
17 October 2016
interview

New York — As an indication of rising interest in Africa by the U.S. engineering and construction giant Bechtel, the company's president for Africa is relocating from London to Nairobi. Bechtel is the ninth largest privately-owned American corporation, according to Forbes. Andrew Patterson took up the Africa post in 2015 after serving with the firm in Kosovo, Panama and Iceland. During last month's U.S. Africa Business Summit in New York, Patterson joined President Obama's Advisory Council on Doing Business in Africa. He talked with AllAfrica about Bechtel's approach to doing business and plans for an expanded presence in Africa.

How does Bechtel's approach differ today from how you operated in Africa in the past?

Bechtel has been in Africa for over 70 years now, working with most countries in Africa at some period through that time. We're building on what we've done in Africa, looking at the needs of governments. What are they looking for? They need the next generation of infrastructure to build their economies. Some of those projects can be self-financed under a PPP [public-private partnership] model and a lot of projects can't.

How would you describe the focus of Bechtel activities in Africa?

We're focused on early engagement with governments, figuring out ways of structuring deals that they need to move forward with large projects where it makes sense that we can bring value. We bring value in finding creative solutions on how to structure works and obtain financing. We help governments look at the right structure for those projects and how can they work with the private sector to create the best model to move forward quickly to deliver the next-generation infrastructure they're looking for.

We look at how to deliver projects that suit the governments' needs, such as how to deliver projects in phases. How do you work with local institutions, local companies, local supply chains, and build capacity to provide knowledge? See Andrew Patterson blog: What is a Bankable Project in Africa?

What makes Bechtel's approach different from other firms?

We are an engineering construction company that delivers large complex projects. That could be anything from oil and gas, the mining of metals or the infrastructure space. Our specialty is working on and managing large complex projects.

What we've been doing in Gabon is a great example. We've been working with the government there over the years, delivering their infrastructure program on a suite of programs. In Angola, we've been delivering a large LNG project for private companies. We can support governments directly by looking at feasibility of projects, at what type of studies make sense, how to structure contracts and - most importantly – how to manage delivery of those projects.

Being on the ground is very important. You can't have a fly-in, fly-out approach.

Our program management approach takes the concept of a project and brings in private sector knowledge. A lot of times you have consultants or transaction advisors come in and have one sliver of that process, and then they hand off to the next consultant. There's no real skin in the game for these consultants to make sure the project continues to move forward because they have a very narrow scope. With a program management model, you're incentivized to make sure that the project is structured right and is successful because you are part of the value chain of making sure the project is delivered.

You mentioned Gabon and Angola. What other countries are you doing projects now?

We don't have a big portfolio on the continent right now, but we're very focused on the next five, 10, 15 years in Africa working with governments on larger projects that they want developed and right ways of structuring them. From last year, we had great conversations with governments in east and west Africa, specifically around infrastructure projects that they've been having real trouble getting off the ground, such as large motorways, rail lines, ports and power stations. Power is critical, and building the next generation of roads and rails is going be important to drive economic growth.

Our engagement has been with countries that have strong leadership to understand the challenges that they face getting projects off the ground and what do they need to move the project forward.

Kenya is a great example. Bechtel is opening a regional office there by the end of this year. I'll relocate from London and we'll start employing local staff to support our engagement, not just in east Africa but across the continent. We don't have many regional offices around the world, and there are only four regional presidents. Because we're focused on engagement in Africa, being on the ground is very important. You can't have a fly-in, fly-out approach. It is really being there.

What are some key obstacles to doing business in Africa?

One of the challenges is always financing. The very large scale projects, especially ones that are going to make huge economic impact, are very complex not only from the delivery aspect but also from the financing. So working with the government very early on with those processes is important. Key is finding the right financial structure for projects.

For a lot of infrastructure projects such as roads, ports and rail lines, it's very difficult for the private sector to be leading investment. It's important that governments look at what is the right structure – how to bring in blended models of financial support or how to tap into export credit agencies like U.S. Ex-Im Bank, OPIC [Overseas Private Investment Corporation] and others at a lower rate than what you're going to find on the commercial market.

Have you seen increased efforts by the American government to promote private sector investment in Africa?

We've definitely been positively impacted by engagement from different arms of the U.S. government. We're seeing coordination from the U.S. government supporting infrastructure projects, supporting U.S. companies and other companies around the world to deliver these projects.

Prioritization is key. Governments need to focus on a few key projects

You've blogged that local content is an "enable for development and growth." How does local content play a role in Bechtel's strategy?

We try to focus on a long-term sustainable approach and match up with local institutions. We try to tap into the local market as much as possible. In every project, even in the U.S., we set up training programs and tailor the training to the skill levels that we need. This makes sense from a commercial point of view. The more that you're using local employees, it's always going to be more cost effective versus using employees internationally. It also works better from an engagement with the community.

When we're about to start a project, we have job fairs. We notify the community. We let them know where to apply and how can they be part of this project. The more you're using the local community, it's less likely you're going to face other challenges as the project move forward.

Beyond labor, what are the other aspects of local content?

Direct employment of people is definitely a key aspect. Another is material coming from a local supplier. So there may be cement factories, but are the cement factories delivering the quality and quantity of cement that we need. We look at how we can engage local companies in a way where they can be successful – how they can grow their companies in a sustainable way. We don't want a local company to triple their capacity of cement, for example, and then - as soon as our project is over - not have a market for that. You don't want a local company to invest in tens of millions worth of equipment and, after the project is completed, he has equipment that's not productive for him.

What impact does the political climate in a country affect your ability to do business?

One area we focus on is [having] a strong political champion. We look at where does the president see the future and what are priority projects. When we see that that political champion, we know we can get through the hurdles. Where we don't see alignment in the government, we don't see the strong political champion, it makes it very difficult to see how to get over those hurdles as you face them.

Will Bechtel be expanding business in Africa?

We have very long-term view on Africa. As a private company, we're able to focus on key infrastructure projects that are very important across the continent. We see a lot of potential. There are signs of it moving in the right direction. And our engagement has been phenomenal over the last year as I continue to spend more time on the ground and engaging with these governments. I think there is a sense of frustration of all these projects that they want to do but they're not quite sure how to move them forward to the next stage.

Prioritization is key. Governments need to focus on a few key projects that they want to deliver in the next few years. And as long they focus on key priority projects, they're going to be successful. If they try to do everything all at once, they're not going to be able to move forward effectively. We can deliver fast-track solutions because Bechtel has a whole of expertise - from understanding how a project is studied, the master planning behind it, preliminary engineering to detail engineering, through construction and commissioning. We understand all these steps.

What kind of receptivity in Africa have you found since you took over the regional portfolio?

There's been a warm reception through my engagement on the ground. Spending time in country, understanding local issues, understanding specific hurdles that they're trying to cross is very important. What applies in Senegal doesn't necessarily apply something in Tanzania. And if you don't understand the detail of those issues, it's near impossible to actually move forward with those projects.

How does a giant global company acquire local understanding?

By spending time on the ground, getting to know all the stakeholders - from local government issues to federal government issues; companies that are out working in those countries; NGOs there. We learn by talking with all parties – and being a good listener. Even those that may not have a project like we'd be looking at may understand what's going on in the market and issues that could affect very large projects.

Does corruption interfere with your ability to do business in Africa?

Across Africa, we look at which governments share the values that we bring. We will always create a transparent model behind delivering projects. Transparency starts with how a deal is structured and how do we implement that, working with local companies and local suppliers,

You are engaged in two countries where people talk a lot about corruption, Angola and Gabon. Have been able to maintain transparency while operating in those countries?

Yeah, absolutely. We're very clear from the beginning on our transparent approach from everything from importing goods to working with local agencies, suppliers and local contractors. We make sure not only does it work for Bechtel, it works for all the different players that are working on our projects.

You've been able to do that in Angola and Gabon?

It's challenging everywhere around the world. It will continue to be a challenge.

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