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BUSINESS EXCELLENCE Oct 2014 | www.bus-ex.com

MONTHLY EDITION

Leni Gas & Oil

The field with yield LGO’s Goudron field in Trinidad promises to be the springboard for sound growth

10 ways to accelerate growth

In dog beers I’ve only had one

University of Kentucky: Waste not, want not


“A single part is critical to the success of the whole�


Integrated aviation manufacturing solutions Aerosud’s integrated manufacturing solutions delivers 1,4 million parts per year to the global aviation industry. Established as a leading smart supplier Aerosud is capable of adding value to partnerships involving programme management, design, development and production processes.

www.aerosud.co.za


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contents

10 Innovation

In dog beers, Iâ&#x20AC;&#x2122;ve had one

How to get beyond skeptical customers who are tired of hearing claims of superiority and donâ&#x20AC;&#x2122;t believe your genuine innovation can benefit their company.

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Leadership

Setting the right direction

We all know that good leaders set the direction for a company, but how do these leaders define their mission in the first place and set the right goals for their business?

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Strategy

10 ways to accelerate growth

With many companies feeling more positive about their future growth, here are ten ways for businesses to accelerate growth and get ahead of the pack.

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Strategy

Innovation leads to dematurity of mature industries

Innovation can turn an industry on its head and leave the leading companies playing catch-up.

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Manufacturing

Waste not, want not

Cheryl G Jones of the University of Kentucky explains why the lean times may be a salutary experience for any business â&#x20AC;&#x201C; and why girls make just as good engineers as boys.

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contents

Business of the month

36 Leni Gas & Oil

The field with yield LGOâ&#x20AC;&#x2122;s Goudron field in Trinidad is a textbook case of a company-making oil project that has moved to production within two years and promises to be the springboard for sound growth.

mining & minerals

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Tanbreez

Ready to roll The world needs rare earths in quantities and Greenland needs inward investment, employment and the chance to trade in global markets.

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GME

Where clean power starts The Kvanefjeld Project of Greenland Minerals and Energy has been boosted by a new technical partnership and progress in both Greenland and Denmark towards regulation for radioactive materials.


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Pesco

Service in action Pesco believes that different industries require customised solutions, products and services, a concept it has been delivering in Chile for more than 15 years and is now exporting. Transport & Logistics

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CAAZ

Delivering Zimbabweâ&#x20AC;&#x2122;s modern air services The Civil Aviation Authority of Zimbabwe (CAAZ) has passed through interesting times and is now working under new direction to meet Zimbabweâ&#x20AC;&#x2122;s economic needs.

Aerosud

Manufacturing

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A star in Africa Capital Star Steel SA is a subsidiary of Capital Africa Steel engaged in production of high frequency welded steel pipe for oil and gas, mining, water treatment industry. Telecoms

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Angola Cables

Out of the depths Angola Cables is laying a cable across the Atlantic Ocean: this is a project with profound implications for global and regional telecommunications as well as for Angola itself.

Flying high With more than 3,000 Airbus A320 and around 4,000 Boeing 737 aircraft having come off the production lines fitted with parts manufactured by Aerosud, the South African brand has truly come of age.

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Capital Star Steel

Food & Drink

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King Pie

Nothing but the best King Pie has grown dramatically over the 20 years since it hit the South African fast food scene: now it is expanding regionally while sticking to the principles that made it a success in the first place.

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In dog beers, Iâ&#x20AC;&#x2122;ve only had one How to get beyond skeptical customers who are tired of hearing claims of superiority and donâ&#x20AC;&#x2122;t believe your genuine innovation can benefit their company Words by

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George F. Brown, Jr.

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I

recently received an email from a business acquaintance who had somehow come upon the book I coauthored and published in 2010 (CoDestiny: Overcome Your Growth Challenges by Helping Your Customers Overcome Theirs). His email explained that he and his firm were grappling with the challenge described in the case study in the book’s first chapter, namely that of capturing value from innovations offered to customers who seem to care only about price. His email included the following observations: “I was very excited when I saw the title to your first chapter – “Your Customers Want More – And They Will Pay for It”. That’s what we have failed to find in our customer base. They will take our innovations, as long as there’s no higher price associated with them. But anytime we try to convince them that they should pay more for products we know are superior, they balk.

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“Our firm has done many of the things your book recommends. We have segmented our customers, and can identify those that should value innovations and reward us for them. We aren’t trying to foist “better-best” products on customers that only need and want “good” products. We have done the research to understand the unmet and poorly met needs of our customers, and our investments are oriented towards addressing them. We no longer are doing R&D projects for their own sake. “I think one of the problems is that we can’t make the case that our products are better, that the customer will in fact get value from them. We hear over and over that everyone claims to be superior to the competition. We hear from our customers that every competitor tells them that they offer the best products. It seems that our customers are treating our claims, and those of our competitors, as business versions of deliberately misleading statements like ‘In dog beers, I’ve only had one’. And if they don’t believe that our innovations create value and that our products are any better than those of our competitors, they


innovation

“When customers dismiss claims about superior performance, success in such settings often requires finding some way to ‘show them the money’”

certainly aren’t going to reward us for providing them.” Since the publication of CoDestiny, I’ve learned that the challenge of capturing value associated with innovation is probably more widespread and more difficult than I believed at that time. I’ve had numerous engagements and discussions with executives facing this problem, and in the process learned of new challenges that have to be overcome in order for firms to capture some of the value they are delivering to their customers through innovation. The following paragraphs describe two such experiences, and offer some additional ideas that might be useful to firms that are still facing that challenge. Show Them the Money The experience of skeptical customers described in the email that I cited earlier is a common one. There are industries in which customers are quite skilled at measuring the value of each supplier’s offering. The commercial vehicles industry, for example, includes many sharp-penciled fleets that keep careful track of metrics like fuel economy and maintenance activities in order to identify which supplier’s components (engines, transmissions, axles, etc.) deliver savings. They reward those bestin-class suppliers with their business, and often are willing to pay an upcharge to the truck manufacturers to ensure those components are on their vehicles. Many

suppliers of energy efficient products are able to document the savings their products offer to the satisfaction of their customers, and are rewarded through either share or price premiums. But not all firms are so fortunate as to have sharp-penciled customers or products where bottom-line contributions are easily measured. And it is in those other clusters of customers that the skeptics are concentrated. In numerous business settings, I’ve come to conclude that trying over and over to make the case for superior performance involves repeatedly banging your head against the wall, with little to no impact in the end. Customers are naturally skeptical, and that tendency is reinforced by competitors who are often either willing to exaggerate their own claims or who can muddy the waters through the use of one of the many ways we’ve all learned to lie with statistics, even involving metrics like “dog beers”. When customers dismiss claims about superior performance, success in such settings often requires finding some way to “show them the money”. Doing so is not always possible, but there are instances in which success can be achieved through a creative offer. One firm with which I worked had failed to gain any market traction with an innovation that extended the service life of the equipment that they manufactured. Their claims and documentation were met with skepticism and counter claims by competitors. What

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finally worked for them evolved from a recognition that there was a way to “show them the money” that would be saved through the purchase and use of their equipment. This firm developed an extended warranty for their equipment that was economically feasible for them because of their product’s longer service life. Matching that offer would have been a costly burden for their competitors. As one executive commented, “The extended warranty gave us, for the first time, a proof statement that couldn’t be discounted, that couldn’t be brushed away. And the market finally began to recognize that our claims of longer service life were valid, that the benefits were real and did in fact translate into value for our customers.” For this firm, the identification of this opportunity emerged from a rather simple exercise. A team from this firm was asked to put themselves into the shoes of a customer organization, and to think through how they might recognize the value that was associated with the product in question. As part of this exercise, they systematically worked to identify and quantify the “value pools” that were associated with the use of the product, and then to determine which of them might change as a result of the improvements that had been introduced. Some value pools didn’t budge (e.g., in this case, there was no gain in energy efficiency from the new product), but

others like the cost of maintenance did. Once this was recognized, it was a short step to identify that an extended warranty was a route to proving that their firm’s claim was real, that the customer didn’t have to take it on faith. In some important ways, there is nothing particularly creative about what this firm did in order to solve their problem of skeptical customers. Most such solutions come from thinking through the options from the perspective of the customer, and this was still another example of that route to success. If your firm is facing a similar problem of skepticism, the exercise described above, of determining whether some value pools would in fact change, might yield the insights necessary to get past skepticism and make your claims feel real to your customers. And, if you can show a customer potential savings in a value pool that they recognize, getting them to share in such gains is a far less challenging task than getting them to accept on faith statements about product superiority. Incompetent Customers Another firm in the capital equipment industry that I worked with recently had recognized the opportunities associated with “Big Data”, and created a generation of smarter equipment that had the potential, along multiple dimensions, to yield cost savings to customers that purchased and utilized it. This firm

“if you can show a customer potential savings in a value pool that they recognize, getting them to share in such gains is a far less challenging task than getting them to accept on faith statements about product superiority”

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innovation

“The mystery of this disappointment was rather quickly solved. What worked in the labs and in the hands of pilot program experts didn’t easily translate into operations in the ‘real world’”

understood that for business-to-business firms, the most significant contribution from today’s incredible information technology was likely to be linked to data-driven innovations that resulted in performance improvements over the life cycle of operations. In their own testing, they found that this new generation of smarter equipment was projected to yield 25-30% savings in operating costs over its life cycle, with a relatively short payback period. In this instance, the challenges of skepticism weren’t overwhelming, as the savings were in well-understood value pools, ones that were already on the radar scopes of this firm’s customers as important cost elements to be managed. And in a few pilot programs that this firm conducted for interested prospects, they were able to deliver savings consistent with that projection. And as a result, they were able to make some good initial sales. The problems began to surface shortly after that. In a relatively short period of time, they began to hear reports of disappointment from their customers, the early adopters who were going to be critical to the eventual success of these new products in the broader marketplace. One customer shared his opinion in the following comment: “After the hype comes the inevitable disappointment. We were sold on big savings, but what we are seeing barely moves the needle. I’m afraid it’s an

expense that can’t be justified.” Another customer shared the observation that “We track this week by week, and were expecting a big improvement. I’d defy anyone to point out on the tracking chart when we installed the new equipment. It’s just the same as before.” The mystery of this disappointment was rather quickly solved. What worked in the labs and in the hands of pilot program experts didn’t easily translate into operations in the “real world”. One individual characterized the problem as that of “incompetent customers”, while a more charitable individual described the problem as that of “failing to recognize that while the equipment was very smart, there weren’t operators in place that were trained – and that had the time – to take advantage of it.” That same executive went on to comment that “We did a great job of designing the equipment, but we didn’t think through how it would be used in customer settings, what would really be required of our customers to fully take advantage of it.” Once again, this revelation is not particularly unusual. In instance after instance, success in the labs is not translated into success in the real world unless there is attention to the changes that will be required in the business models and operations of the customers that implement the innovation. Understanding the new skills, competencies, training, time, and incentives that will be required

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“it’s important to think through everything that will be required to ensure that the benefits of an innovation are in fact realized in the real world”

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to ensure that change will take place is as much a prerequisite to success as is the technology associated with making equipment smarter. This challenge is a particularly acute one for innovations that involve such “Big Data” concepts, as the introduction of such technology can be a major change in many environments in which it is introduced. This firm was able to implement a solution that resolved the challenge of those “incompetent customers” by moving responsibilities out of the day-today operating environment to a central site manned by experts who had no other responsibilities than that of ensuring that the potential of the savings offered by this smart equipment was in fact realized. That step added a bit to the cost of the overall solution that the firm brought to its customers, but the gains nonetheless remained more than adequate in terms of the ability of this equipment to create value for the


innovation

customer and the supplier alike. So even in instances in which skepticism can be overcome, it’s important to think through everything that will be required to ensure that the benefits of an innovation are in fact realized in the real world. Summary Capturing the value associated with innovation remains a challenge for many firms. Far too often, businesses still hear the message described in a case study in CoDestiny: “If an idea costs a dime more, it gets rejected out of hand”. The problem isn’t going to go away, and, as the case studies described here illustrate, new dimensions of the problem surface almost every day. Finding out how to get beyond skeptical customers and ensuring that good ideas remain good ideas when translated into the real world are among the steps that firms can take to address this ongoing challenge, to make sure that the value they are trying to create can be translated into value that is captured for their shareholders.

About the author

George F. Brown, Jr George consults with industrial firms on growth strategy through his firm B-to-B Advisors, Inc. He is the coauthor of CoDestiny: Overcome Your Growth Challenges by Helping Your Customers Overcome Theirs and the cofounder of and a Senior Advisor to Blue Canyon Partners, Inc., which he served as CEO for fifteen years. George has published frequently on topics relating to strategy in business markets, including articles in Industry Week, Industrial Distribution, Chief Executive, Business Excellence, Employment Relations Today, iP Frontline, Industrial Engineer, Industry Today, and many others. gfb@BtoBAdvisors.com

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Setting the right direction Words by

Marielena Sabatier


Leadership

W

e all know that good leaders set the direction for a company, as US clergyman and leadership guru John C Maxwell put it, “A leader is one who knows the way, goes the way, and shows the way.” But how do these leaders define their mission in the first place and set the right goals for their business? Leaders need to think big, in order to create a compelling vision, using plenty of imagination and creativity to consider the future business strategy. Imagining the business without any boundaries, limitations or financial constraints could be part of the process of establishing the vision. What would it look like? What new products and services could be offered to customers? What do you see, hear and feel? What are customers saying about the company and how do employees feel about their work? What are customers saying about the company now and how could it be improved? This creative exercise can be vital in helping shape the strategic planning process. Even if some of the suggestions may not be realistic; imagining a company without any barriers or obstacles could lead to future innovation or to changes in the business that could deliver genuine improvements. Once the big picture is identified, a more achievable vision is then created by taking into account the current situation and addressing any obstacles that need to be overcome. It is just as important that a vision is co-created with the senior management team. If a vision is collective, with ‘buy in’ and support from the top team from day one it is more likely to be adopted across the organisation more easily. When a clear vision has been established, it is important to look at what specific goals are needed to achieve the vision. Unlike the vision, the goals will need to be clear, purposeful, realistic and measurable.  Consideration must also be made of what values

are most important to the business and what behaviours are expected as the norm from employees. These values need to be embedded in the culture but for this to happen they must also be reflected in the behaviour of the leader at all times – the leader needs to show the way and clearly demonstrate what is expected. As management guru and bestselling author, Stephen Covey says, ‘What you do has far greater impact than what you say’. In order to ensure values are embedded in the culture and that goals are achieved they could be set as part of employee’s individual performance development plans. If there are financial goals they can be measured at quarterly reviews. Equally, if one of the values is ‘passion’ then how passionate people are about their roles could be measured as part of their performance review. Communication is a vital part of establishing a clear vision. Leaders need to clearly and consistently communicate the company’s vision and business goals at every opportunity. This sounds obvious, but it is something many companies do poorly or fail to do at all. If your workforce doesn’t know where it is going, it can’t be expected to get there. Creating a compelling and believable vision will motivate your workforce and you will be far more likely to achieve your goals.

About the author

Marielena Sabatier Executive Coach and CEO of Inspiring Potential works with businesses and executives to develop and boost their confidence to improve their performance at work. www.inspiring-potential.com

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10 wa accelerat

With many companies fe their future growth, here ar accelerate growth and Words by

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Step


ays to te growth

eeling more positive about re ten ways for businesses to d get ahead of the pack

phen Archer

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Question the status quo Winning businesses are those that are flexible, lean, energised, fluid and innovative by nature and yet, few businesses really live up to these ideals. To accelerate growth, change is often needed so a successful business tends to be one where all assumptions are challenged. It is vital that business leaders question the status quo, that they are curious and encourage challenges from their colleagues and senior management team. Amongst those challenges will be the secret of future growth and success. In reality they need to pull apart yesterday’s business and build tomorrow’s model.  1

Slim down products/services The business world is littered with warehouses full of stock that no one wants to buy. Companies need to ruthlessly narrow their offerings and put their sales and marketing efforts behind those that customers want. This focus will ensure that growth and a better reputation will follow. 2

Talk to every customer but NOT about products and services This may sound counterintuitive but it works. Successful companies are those where executives have regular dialogue with their customers about the challenges they face which enables a far better understanding of their client’s business and where they can truly add value. By 3

doing this they can ensure that they will sell customers value – not products and services. Selling value will ensure a company grows and differentiates itself. Add 25% to the quality of customer service A bit optimistic? Companies should mystery shop themselves to understand how their customers are treated and how that can be improved. Business leaders need to maximise the team’s customer focus – top to bottom of the organisation, inside out. Everyone must be trained in commercial excellence so they maximise the sales/ quality/profit delivery. Another important factor is to steal ideas from other industries. The world is full of gold nuggets and most are ignored because a silly neuron says that what Starbucks/Mars/Carphone Warehouse do is not relevant. It is. Companies need to open their eyes and broaden their horizons.  4

Fire some customers This sounds crazy but if companies need to examine the bottom 20 per cent of their customers and ask what it is costing to serve them.  Are they growing?  Some customers cost too much to serve because they don’t buy enough, some cost too much because they are unreasonably demanding. If customers don’t offer a real potential to grow beyond today’s revenues then get rid of them. But do it nicely. Put the prices up and stiffen terms; they may through this method become profitable.  The bottom tier of customers 5

“Companies need to ruthlessly narrow their offerings and put their sales and marketing efforts behind those that customers want”

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strategy

“By understanding the competition, companies can see where and how they can take a competitive advantage early”

is like the bottom tier of products: The Only way is Exit. Do social media Social media might seem to be ‘so 2010’ but, for many companies it’s an uncoordinated and ill thought through mess of ‘Follow us on Facebook and ‘subscribe to our electrifying Twitter feed’.  This medium is rarely done well hence its inclusion in this list. Get it right and companies will gain market presence and reputation and it does not cost much. 6

Keep your competitors close Companies need to dance with the enemy? Remember Sun Tzu “know your enemy and know yourself,” then: “you need not fear the result of a hundred battles. Also “be close to your friends but closer to your enemies”. By understanding the competition, companies can see where and how they can take a competitive advantage early. They will also be more aware of their competitors make mistakes and there are as a many lessons in failure as there are in success. Forget satisfaction in others failure though – companies need to learn from the mistakes and take action not to copy them. 7

Examine how to retain existing customers better Businesses need to look at lapsed customers and how to recover them. There is always a customer churn rate but don’t accept that customers cannot be brought back. 8

They can and the cost of sales to make this happen can be very low. Everyone likes to feel loved – customers too. Encourage true innovation Companies need to create a culture where employees are encouraged to perform, evolve and innovate. Everyone in a company should see themselves as supplier and customer to others. If done without blame then this is a really healthy dynamic and will create innovation and growth with little effort. Beware people, who are comfortable – they are not trying and not trying is not contributing. 9

Empower your team to create a winning culture To lead is to empower. It’s the whole team that will make success happen. Companies need to encourage staff to use their insight and create improvements. The journey of 100 miles starts with a small step. If everyone is making that step in unison then the organisation is moving forward. Only the free culture with supportive leadership will make that happen. .10

About the author

Stephen Archer Business Analyst and director of UK business consultancy, Spring Partnerships. www.springpartnerships.com

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[ Issue 83 ] BE Weekly


Innovation leads to dematurity of mature industries Innovation can turn an industry on its head and leave the leading companies playing catch-up Words by

David Dumeresque

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M

uch of the current emphasis on innovation seems to concentrate on new sectors capable of bringing about significant social and economic change, from mobile telephony to digital technology. As a result, sectors that could be classified as mature and which are seen as generating little in terms of innovation are given scant regard. No one doubts that innovation is vital not only to businesses but also to national economies. Innovation provides a competitive edge in both today’s markets and those of the future, yet success is often more readily seen when the impact is novel (take smartphone  technology). So where does that leave innovation in mature industries whose products were in greatest demand 20 or 30 years earlier? Additionally, what is the significance of innovation in these industries and, indeed, is innovation really worth pursuing when growth prospects may be deemed to be few and far between? If the process of innovation is intrinsic to current economic activities, and given that the majority of companies (globally) are operating in what can be classified as mature industries, then innovation in this sector is certainly of some significance. Is it worth pursuing? The answer may be an obvious ‘yes’ but it depends on a number of factors, not the least of which are historical legacies, industry trends, government and environmental policies and customer and competitor behaviour.

Two sec tors , automotive and energy, are excellent illustrations of where companies in mature industries have decided to aggressively pursue innovation as a means of driving top line growth. Whilst environmental factors contribute greatly to this need for innovation, it is often a single company or small group of companies that ‘jumpstarts’ an entire industry. Tesla Motors is a good example. Although it was not the first to introduce an electric vehicle (Thomas Parker built the first practical production electric car in London in 1884, using his own specially designed high-capacity rechargeable batteries), nonetheless it  is Tesla that has begun to demature the automotive sector and push it towards a future that is more sustainable. Whilst the advance may be slow as motor vehicle company executives, policymakers and consumers ponder whether electric vehicles are a cost-effective replacement for the conventional petrol/diesel-powered internal combustion engine vehicles, the  transformation has begun. Some industry analysts believe that within the next 40 years, most vehicles being driven on our roads will be electric. This dematuring of the automotive industry is not the first time it has happened, and it is not uncommon for industries to mature and demature, then go through the whole process again. In the US, it took the arrival of the Japanese

“This dematuring of the automotive industry is not the first time it has happened, and it is not uncommon for industries to mature and demature, then go through the whole process again”

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strategy

“Usually, dematuring is not the exclusive domain of one industry on its own. Others closely associated with that industry will also being affected”

in the late 1950s to demature an industry that was based almost exclusively in one city; Detroit. Until Toyota and Datsun arrived on the scene, American vehicle manufactures struggled to differentiate themselves other than by price. This is one of the hallmarks of a mature industry; markets become saturated and demand is either static or declines, margins and profits start eroding and this results in an emphasis on costcutting and discounting to stay afloat. The development of ef fec tive and affordable electric vehicles, in addition to the rapidly expanding vehicle recharging infrastructure, is transforming virtually every aspect of the mature automotive world.  Usually, dematuring is not the exclusive domain of one industry on its own. Others closely associated with that industry will also being affected. For example, with the dematuring of the motor vehicle sector, the tyre industry is also undergoing some changes. The  Goodyear Tire & Rubber Company announced it was developing a tyre specifically to fulfil the distinctive requirements of future electric vehicles.  Within the energy sector, it is obvious to all that the exploitation of fossil fuels has, despite the current shale gas/fracking boom, a limited shelf life. How the behemoths of the oil industry address the issue over the next few years will define the longevity of those  companies. Those who do

not embrace and lead the search for alternative energy solutions can expect a long term decline into oblivion. Situations like this open up co n s i d e r a b l e o p p o r t u n iti e s fo r company executives, provided they are awake to them. All too often, however, management and boards become preoccupied with appeasing shareholders and the market by concentrating on short-term objectives. The case of IBM and the advent of PCs illustrates this point. When Apple and others stole the march on Big Blue, it was not because IBM was unaware of this developing market, but because its priorities lay with providing its large corporate clients with mainframe systems that returned substantial profits. Essentially, IBM executives saw the computer industry as hardware-driven whereas companies like Microsoft saw that the future lay in software. More importantly, they saw that

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ITâ&#x20AC;&#x2122;S TIME TO FOCUS ON YOU

Commercial Publishing Services Introducing our new commercial publishing services team Would you like to have your very own corporate magazine or newsletter? We can help you with your publishing needs from CSR, Sustainability or annual investor reports to your employee or shareholder handbooks. Whatever you need, we would love to help

28

[ Click here to find out more ] or email [ mday@bus-ex.com ]

[ Oct 2014 ] BE Monthly


strategy

“If the milking of cash cows in mature companies turns managers into dairy farmers who never look at the weather outside, then the future for the organisation looks bleak”

there would be a significant diminution on earnings should they make the change. However, it is to their credit, that, having stared into the abyss, IBM reconfigured and reinvented itself as technology and consulting company. Senior executives of companies operating in mature markets need to ensure they don’t take their eyes off the ball. It’s one thing to continue operating profitably by milking the cash cows but it’s quite another to be unprepared when innovation takes the ground  from underneath them. If the milking of cash cows in mature companies turns managers into dairy farmers who never look at the weather outside, then the future for the organisation looks bleak. Senior executives can avoid these risks by taking appropriate action, such as introducing programmes aimed at encouraging innovation and progressive change within the organisation. They should also look at developing a sense

of personal ownership and the need for accountability from bottom to top within the company. Most importantly, they should encourage the next generation in the organisation to embrace change and to be vigorous in pursuing it.  Once employees are inspired by the concept of intrapreneurialism, management should reinforce this culture with effective measurement and leadership to allow innovation to flourish. The entire structure of the organisation needs to be capable of reacting fast to changing consumer requirements and competitor progress. CEOs should also look at recruiting appropriate talent to ensure the company is attuned to growth opportunities. The problem with cash cows is that they don’t have an infinite life and other organisations will quickly catch on to making a better product or service that more closely matches the requirements of the market.

About the author

David Dumeresque David recruits senior executives and board directors for Information, Communications and Entertainment organisations across publishing, broadcast, digital media, as well as leading the firm’s Professional Services practice and acting on behalf of more general consumer products companies. He also has advised a wide spectrum of professional services firm on senior lateral hires, including lawyers, accountants, consultants and real estate professionals. www.tyzackpartners.com

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Waste not want not Cheryl G Jones of the University of Kentucky explains why the lean times may be a salutary experience for any business â&#x20AC;&#x201C; and why girls make just as good engineers as boys Words by

John Oâ&#x20AC;&#x2122;Hanlon

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W

ith 22 years at Toyota behind her, working up from assembly manufacturing supervisor to VP of Manufacturing Cheryl Jones has nothing to prove when it comes to the knowledge of lean systems. However that is not where she first realized that waste is often endemic, always bad for business and ultimately unfair. That came in a very different industry, when she was working as a checkout operator for Krogers, the American supermarket chain. Think about it, she says; the food industry has to operate on low profits, and if the product is to be within its sell-by date, just in time (JIT) delivery is essential. Training for checkout staff, she recalls, focused on efficiency and how to scan product effectively and quickly. Throughput was measured, and staff worked, effectively, to establish a standard working practice. After eight years she moved to Toyota as we have seen, but even after a stellar career there, she confesses she didn’t quite realize when she moved into teaching how low the awareness of lean principles was throughout USA business. “I thought that was how every company was run!” Well, it is not, and that is one reason for the success of the Lean Systems Program, started in the 1990s by Toyota and the University of Kentucky’s College of Engineering to study and share true lean.. “When I came to the university I had the chance to get into a large number

“It appears to me the more profit there is, the easier it is to tolerate waste internally!”

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of other companies and see how they do things. I still can’t say I truly know why companies differ so much, but it appears to me the more profit there is, the easier it is to tolerate waste internally!” With a big profit margin there is not the pressing need to look at the very fine details and eliminate waste. Toyota itself learned this lesson the hard way, having teetered on the brink of bankruptcy back in 1949. It survived by paring its operations to the bone when Taiichi Ohno, and Eiji Toyoda developed the Toyota Production System (TPS) and consciously maintained that approach even in times of surplus. “You always felt, though the company was profitable, that money was scarce and we were broke! Now when I go into companies in aerospace, rail, or transportation to name just a few, I find many of them have a history of so much waste that they can’t even see it! There is so much improvement they could achieve if they had the Toyota mindset.” There’s a tendency to be inward looking when it comes to process improvement, but Jones always sees the bigger picture. Certainly, any company that has been returning big profits to its shareholders, generously compensating its people – especially management –and growing steadily, can lose sight of the waste it creates. But that mindset is bad for the nation as a whole, she says. “When the economy dropped off people started to think about saving money but now that we seem to be getting back into growth, my hope is that we keep that focus. The more people think about efficiency the better for the US economy – and the global economy too.” Another mistake many companies make, she continues, is to get sidetracked when taking a blinkered view of cost as related to profit. They may have some idea of workflow and


Manufacturing

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operational efficiency, but unlike Toyota they haven’t lived with it enough to make it part of everyday operations. It especially upsets her when she sees the kneejerk reaction much of industry has once it feels the squeeze imposed by economic contraction and unfavorable exchange. They lay off staff. “It tears at my heart when they cut labor to reduce cost before eliminating waste in other areas. Of course it works short term but if you have so much waste in other areas you’d be better using the labor to reduce the waste!”

“At the university we encourage companies to start at the top”

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So what is the answer? “At the university we encourage companies to start at the top. In some of the most successful companies making this transformation, leadership rolls up their sleeves and changes what they do.” The problem is hands off management rather than top heavy management, she believes. Executives need to manage, but not in isolation. They need to understand they’re the ones who can help solve problems identified at the shop floor or out in the field. That requires their direct involvement and the resulting data to identify both the problem and the solution. Much of her work is to teach companies eight-step problem solving leading to work standardization, but standard work is not in itself a tool for problem solving. She warns, “Managers like standardization because they see it as a way to address quality issues, but it is not a solution in itself.” The


Manufacturing

problem solving process should precede the standardization process. Standard work will then make future events easier to handle. She cites a recent discussion with a surgeon who had really tried to embrace the principles of standard work. “He said: ‘the more everyone understands what their role is, what they should be doing, and the procedures we should follow, the more it helps me when we have a problem.’ He was really beginning to get it!” In this case, standard work made life easier in the hospital but it also improved the patients’ experience and their confidence. As a result they can be less hung up on getting the best surgeon because they know they are in the best process! Cheryl Jones has two young granddaughters and whatever they end up doing she wants them to have the widest possible choice. “When I first went to Toyota there were no other women working in manufacturing in Japan. Now they have more female engineers and managers, but most manufacturing companies still struggle with females and diversity.” A meeting with the Oscar winning actress Geena Davis encouraged her to think about reasons why girls rarely see engineering as an option. Davis had founded her Institute on Gender in Media which set out to work collaboratively with the male-dominated entertainment industry to dramatically increase the presence of female characters in media aimed at children, and to reduce stereotyping of females. If that battle still has to be fought in the media, it has hardly been joined when it comes to industry, Jones believes. But she remains optimistic. One of the girls was given a small piece of equipment that injection-molds a small part – It molded her mind as well and impressed the child enough to make her say she wants to become an engineer! Her older grandchild plays Minecraft, which is a complicated

“Managers like standardization because they see it as a way to address quality issues, but it is not a solution in itself”

building game that she loves, and which develops dimensional thinking. You don’t have to give up interest in the things that fascinate girls like nail polish and make-up, she says, but why not encourage an interest in what these things are made from and by what processes? With one of the 2005 Automotive News Top 100 Women in the Automotive Industry for a grandmother, the girls could hardly have a more positive role model. Don’t be afraid of lean concepts, she concludes. Lean is a Toyota concept not a ‘Japanese’ concept. “Toyota grew it from best practices in other industries like food, or the military. They pooled it to find the most effective way to run their company. They are constantly reviewing and revising it, and looking at what other people are doing. Lean thinking has constantly changed, even within Toyota. If you are always building in continuous improvement you are building the culture you want long term. It is not the tools that make us lean; it is the way we approach the business.”

More Information To learn more about University of Kentuck Lean Systems Program. www.lean.uky.edu

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Leni Ga

The field w

LGOâ&#x20AC;&#x2122;s Goudron field in Trinidad is a textbook case to production within two years and promis

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as & Oil

with yield

e of a company-making oil project that has moved ses to be the springboard for sound growth

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peaking in June Leni Gas & Oil (LGO) chairman David Lenigas said: “Our Trinidad operations will do 2,000 barrels per day (bpd). Not might, - will.” The company is one of the more salient success stories in the Australian entrepreneur and former Lonrho chairman’s portfolio. And the market is backing him: LGO’s shares on London’s AIM market have risen from under a penny in November to over 4-pence at the time of writing. “I think the industry was waiting to see if our initial results at least met if not exceeded our predictions, which they did, and have moved the value of the company up to reflect that,” says Neil Ritson, the company’s CEO. By initial results, he means the performance of LGO’s first well on its onshore Goudron Field in Trinidad, which started producing in May and better than any resource estimates showed that this asset has company-making potential. To reel back, LGO cut its teeth on a field redevelopment in Spain, and though it learnt a great deal one of its conclusions was that Spain is a too high cost operating area for a junior company. It needed to find somewhere it could deploy those skills in a more benign operating environment. Following up on and early partnership in a small producing field in Trinidad LGO made a strategic decision to expand its footprint there. “Trinidad has a lot of production

S

“Trinidad has a lot of production history behind it - three billion barrels of oil have been produced onshore there over the last 100 years”

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Neil Ritson, Chief Executive Officer


Leni Gas & Oil

photo credit: Brett Ross photography

“We moved on to the site in October 2012 with a three phase plan. Phase One was to reactivate as many of the old wells as we could” history behind it - three billion barrels of oil have been produced onshore there over the last 100 years,” explains Ritson. “As a result it has great opportunities in field reactivation – precisely what the company was set up to do.” In October 2011 LGO acquired a Trinidad and Tobago company, Goudron E&P Limited and a year later had secured the exclusive Incremental Production Service Contract (IPSC) to develop the Goudron Field in south eastern onshore Trinidad. A canny move, since the field had been bypassed by the majors, perhaps because of its remote location though it did have the distinct advantage of being close to the Petrotrin owned pipeline which crosses the island to the Pointe-à-Pierre refinery on its west coast. “We moved on to the site in October 2012 with a three phase plan,” he continues. “Phase One was to reactivate as many of the old wells as we could.” Historically some 150 wells had been drilled on the field and thus far LGO has identified and investigated around 90 that it believes have some future production potential. Around 70 of the old ‘nodding donkey’ or beam pump wells were reactivated in this phase, giving the company early revenue from the 350 bpd they could deliver. This was old technology, he hastens to point out, but it facilitated quick progression to Phase 2, a programme of infrastructure reconstruction. “We had to remake a lot

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Rig on the Goudron field

of roads, and upgrade communications because when we first arrived there was no signal to even use a mobile phone!” Old roads and bridges were made operational, a communications tower erected and a new camp constructed, preparing the way for the new well drilling programme. This was the meat of the strategy. Not much could be expected from the old wells. They were drilled maybe in the 1950s using heavy mud that blocked the transfer of oil from the rock formation and created a ‘skin’ or damaged area round the well bore, and completed using guns that could only place one hole per foot, with those holes penetrating a very short distance, perhaps as little as an inch beyond the steel casing. Though LGO will optimising these wells by adding new perforations the new well now flowing has demonstrated the massive advantage to be gained by state of the art drilling and completion technology that does much less damage to the resource.” The first well, no 664, was budgeted on delivering 65 bpd, a significant difference from the average five bpd achieved from the old wells. Optimistically, Neil Ritson thought that it might reach 100 bpd. In the event it came in at 240 bpd, and that at a constrained rate, choked to 7/32” – no wonder the investors liked that. That was at the end of May, and the well is still flowing though the size of the choke was still further reduced to 6/32” in order to not produce any water or sand from the reservoir. Taking out the oil at maximum speed allows these pollutants to come up with the oil. “The first well we put in is flowing under natural pressure of between

“The first well we put in is flowing under natural pressure of between 500 and 600 psi, at a stable rate of 200 bpd through a 6/32” choke”

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Leni Gas & Oil

Pumps at the Goudron field

prepare so the more wells that 500 and 600 psi, at a stable Did you know? each can support the better, rate of 200 bpd through a 6/32” and as LGO plans to drill a total hole; and by not drawing it down of at least 30 wells placing up too quickly we are not causing 3 billion barrels to six per pad will save a lot of any damage.” The enhanced Oil Trinidad has money and – just as important performance of this well is down produced in the – mean a much lower impact to the use of modern blowout last 100 years on the virgin forest that covers preventers, allowing drilling the property. Once the well is in with much lighter mud and then 30 million barrels production, the pad footprint is perforating with much more Goudron’s current reduced to the size of a couple powerful completion guns that 3P reserves of tennis courts: the remainder can shoot six holes per foot with regenerates very quickly. penetration up to 30”. The second well has delivered So far just the one well has very similar results to the first, says Ritson. been put into production, but four more “We can’t complete those wells until we move have been drilled already by LGO’s drilling the rig so we will drill them, then complete contractor Well Services and drilling will them, and get the production from four wells shortly be under way on four more. Wells 665 all at one go. Completion is not a long process to 668 are deviated wells from a single pad, and can be done in 24 to 36 hours. Then we an area about the size of a football pitch – immediately move the rig to another pad and ‘deviated’ meaning that they access a point probably sink another four wells off that. We in the formation that can be 1,000 feet from are talking to rig contractors about bringing the surface location. The pad is expensive to

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“When we took the field it was doing 40 bpd; it is now doing 450 and I can be pretty confident that by the end of the year it will be doing 1,000” a second rig on to the field soon to accelerate this drilling programme – the sooner we drill them the sooner we are in production!” If each of these 30 wells produces like the first the daily output would be 6,000 barrels, making David Lenigas’s predictions look positively conservative. And this does

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not take Phase 3 into consideration, which will see secondary or enhanced recovery that can be done once the initial flow declines. The adjacent Beach Field operated by Texaco, where water flooding has taken place, has yielded 30 million barrels to Goudron’s five million, and the two fields are


Leni Gas & Oil

Operations staff at Goudron

of similar size, Neil Ritson points out. “When we took the field it was doing 40 bpd; it is now doing 450 and I can be pretty confident that by the end of the year it will be doing 1,000. By the end of 2017 it could be doing 5,000, so great is its potential.” The remarkable speed with which the wells are being developed could only be achieved with the support of Petrotrin and the Ministry of Energy & Energy Affairs, both of which have been unstintingly supportive, as we noted in last year’s Special Report (www.bus-ex. com/article/petrotrin) Petrotrin is very keen to facilitate investment in well development by independent companies. And Petrotrin’s President Khalid Hassanali joined the Minister

Kevin Ramnarine when the latter paid one of his rare visits to an oil project when he came last October to mark the first anniversary of LGO’s involvement. On that occasion the Minister expressed his pleasure in seeing the reactivation of these wells, confirming that projects like Goudron are in line with the Ministry’s policy to increase oil production and thus derive additional revenue for the economy of Trinidad and Tobago. “There has been huge support from Petrotrin in getting approvals through quickly and also adjusting the terms of the contract to further incentivise us; they reduced the royalty rates by 50 percent in return for us committing to a bigger work

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“Our market cap last year was less than £20 million, now it is over £100 million. That means we have better access to institutional investors, lending banks and the like”

Neil Ritson Chief Executive Officer Mr. Ritson holds a Bachelors degree in Geophysics. He has worked in the energy sector for over 35 years, initially with BP plc, where he held the roles of International Chief Geophysicist, Head of Geoscience Research and Business Unit Leader for both Norway and Alaska Exploration. Subsequently Mr. Ritson managed the international operations of Burlington Resources Inc. and more recently he was CEO at Regal Petroleum plc before founding the Vanguard Energy Group where he was Chairman and CEO. Mr Ritson is an Executive Director of Solo Oil plc and Managing Director of NR Global Consulting Limited. He is also Non Executive Director of Enovation Resources Limited, a Bermudan registered private company active in the UK North Sea. Mr Ritson is a member of the Audit committee.

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programme, though not a bigger programme we had already planned to do. They have extended our contract, which is particularly helpful when there is a question of enhanced oil recovery schemes which may run for 20 years. Petrotrin is a very supportive partner. Equally in alignment with Petrotrin’s policy (again, extensively covered in our Special Report) is LGO’s commitment to hire exclusively local staff, wherever in the world it operates, and to sustainable oil development. This is more than just complying with regulation – remember too, says Ritson that good business and good environmental practice go hand in hand. “We manage water carefully, cleaning it completely, not least because of the price of oil. No oil escapes back into the environment and the water returned is treated to be consistent with the creeks.” Wildlife, vegetation and air quality are similarly carefully managed. The small areas that do have to be cleared regenerate very quickly. LGO financed its purchase of Goudron, and initial working capital, by raising £5 million on the public markets. More recently it has been using bridging finance, available on the revenue from 350 bpd being produced. “We


Leni Gas & Oil

Goudron Tank Battery

have had to balance that with small amounts of equity to avoid the risk with short term finance that you end up borrowing to repay borrowings,” says Ritson. “The next step for us is long term finance.” With proven probable and possible (3P) reserves of 30 million barrels and established revenue this project is clearly debt financeable so the company is negotiating longer term lending to carry the project to the next stage. “The programme will become selffunding probably early next year but there are other things to do and certainly a water flood could be an attractive proposition, though an expensive investment to make.” Looking further ahead, LGO wants to build on its experience and knowledge of Trinidad & Tobago and the deep relationships it has built to take up further opportunities here.

With its track record so far the processes followed at Goudron can be replicated at least as fast elsewhere. “Our market cap last year was less than £20 million, now it is over £100 million. That means we have better access to institutional investors, lending banks and the like.” For now, though, the Goudron field will – not might – yield enough oil to make LGO a substantial gross profit by the end of this year.

Leni Gas & Oil

+44 (0)20 7440 0645 info@lenigasandoil.com @Lenigasoilplc www.lenigasandoil.com

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Tanb

ready to

The world needs rare earths in quantities employment and the chance to trade in strategic position close to th 46

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breez

to roll

and Greenland needs inward investment, n global markets while making use of its he transatlantic trade routes BE Monthly [ Oct 2014 ]

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Diamond drilling rig

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Tanbreez

are earth elements (REEs) continue to be a hot topic. This group of 17 chemically similar elements crucial to the manufacture of many hi-tech products is causing international supply headaches. China currently produces about 90 percent of the world’s rare earths and produces more than 70 percent of the world’s rare earth magnets - neodymium in particular is used to make smaller, more efficient and more powerful magnets used in loudspeakers and computer hard drives. In order to curb environmental degradation and protect resources, China has set output ceilings, export quotas and stricter emissions standards as well as high resource taxes for some ores. By restricting exports and driving up prices China can effectively force companies to manufacture devices that need to incorporate rare earths in its own factories. However, the World Trade Organization ruled that China’s export duties, quotas, and administration of rare earths, tungsten and molybdenum products were inconsistent with WTO rules. A viable, reliable and politically neutral source of rare earths needs to come on stream soon, and the more accessible it is to global industrial markets the sooner will China’s stranglehold on these critical minerals be broken. They’ve recently discovered large deposits in Afghanistan, but who wants to start a mining operation there? Enter Greenland, where the largest REE deposit outside of China itself has been under development by the mining company Tanbreez, which under the leadership of the vastly experienced Australian geologist Greg Barnes has invested more than $40 million dollars in developing a world class deposit that will be a significant resource for many generations. The ‘ree’ in Tanbreez stands for the rare earths, while the rest of the name is made up from the chemical abbreviations for associated minerals tantalum, niobium and zirconium. All of these are sought after as new uses are found for them in, among other things, electronics,

R

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alloys, mobile devices, car exhausts and green power generation applications, however one feature of the Tanbreez deposit is the large proportion – 30 percent – of the more eagerly sought after heavy rare earths that it contains such as dysprosium, used in lasers and commercial lighting. Despite their name, many of the rare earth elements are quite plentiful around the world. However, the forms in which they occur in the earth’s crust are often not concentrated enough to be economically viable to recover. That is certainly not the

case at the Kringlerne deposit in southern Greenland which is probably the largest rare earth deposit in the world – certainly large enough to disrupt the market. The ore that is mined, called kakortokite, is easy to separate into three constituent concentrates; whitish feldspar, black arfvedsonite and red-coloured eudialyte; in a chemical-free magnetic process that will be carried out on site. There are many industrial uses for feldspar; eudialyte holds the REEs and will be shipped out for further processing; while arfvedsonite is attractive when polished and used by some

“The Danish Technological Institute has done some research into the use of arfvedsonite as a substitute for sand when making bricks and roof tiles”

Geology in process

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Tanbreez

Main ore body looking from West

as a mystical stone, it has no feldspar have been separated Did you know? bulk value, though that may out, there remains a black be about to change. residue called arfvedsonite, and The mining project will this would have to be contained $40 million consists of an open mine pit, in tailings dumps. However the Investment a processing plant, a port Danish Technological Institute amount in (including a helipad), a mine has done some research into developing a camp and internal connecting the use of arfvedsonite as a world class substitute for sand when making roads. A tailings deposit is deposit bricks and roof tiles.” part of the mine plan, and there is no doubt that this is an It makes a lighter and stronger 100 element that would need careful product, he says, with excellent Direct jobs for management and eventually load bearing qualities: if adopted local people remediation. Unless a better by the building trade it would at Tanbreez way can be found, that is. Hans mean that all of the material Kristian (Hank) Schønwandt is a taken from the pit could be consultant to Tanbreez: he used taken away and sold. That is a to lead the Bureau of Minerals and Petroleum fact that is very important to the Greenlandic (BMP, now MLSA), and understands better authorities, who are deeply concerned that the than most the balance between Greenland’s arrival of large scale mining could degrade the economic needs and its unique environment. unique landscape, pollute the waters around “Once the mineral-bearing eudialyte and the the coast, and leave undesirable residues.

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The only thing now holding up the construction of a working mine and processing plant is the granting of an exploitation licence. On 21 March 2012, Tanbreez submitted to BMP a draft application for an exploitation licence covering rare earth elements and feldspars. Since then the process has been delayed, as the Greenland government works through the process of formulating new legislation to cover mining activity. One problem with this, in the opinion of Hank Schønwandt, lies in the vey uniqueness of Greenland’s geology. Kakortokite is named after Qaqortoq, the nearest settlement to Tanbreez, precisely because it in a mineral not found anywhere else. The legislation, he thinks, should be framed to reflect the reality on the ground, rather than trying to make the deposit fit the legislation! Recent drilling at the site has shown that it contains at a deeper level other REE-bearing structures that may include different minerals, but each time a variation

Greg Barnes Chief Geologist More than 40 years in the mining industry including (but not limited to) gold, silver, rare earths, iron ore, coal, oil and gas, niobium, pot ash and platinum. This work has included head geologist duties in Australia, Asia, central and eastern Europe, Greenland and eastern Africa.

Tanbreez 400 metres high section of ore

“A hydro-electric line runs close to the ore body so we will be able to get all the power we need and there is no lack of water”

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Tanbreez

Qaqortoq port

is detected the situation changes. However it should be borne in mind that no part of the deposit contains significant uranium or thorium – a factor that delayed other projects in Greenland until it lifted its zero tolerance policy to radioactive materials less than a year ago. Thanks to the benign processing method and the fact that the deposit adjoins a natural harbour, which can take large ships all the year round, it will have very little impact on the physical environment, says Greg Barnes. “A hydro-electric line runs close to the ore body so we will be able to get all the power we need and there is no lack of water.” The impact on the local population will be considerable, but all positive. “All the labour we are likely to want is available locally. We aim to operate with a maximum

of local workforce in all job categories too.” With the exception of key managerial and professional positions, all positions will be offered to local workers, he promises. Around 30 to 40 workers will be needed once construction starts, rising to a maximum of 140 at peak times over the two years it will take to complete the work. Once operational the project will support almost 100 jobs, and in a country with only 60,000 inhabitants that is a real social contribution.

Tanbreez

+299 586641 info@tanbreez.com www.tanbreez.com

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Where clean power starts Greenland Minerals and Energy The Kvanefjeld Project of Greenland Minerals and Energy has been boosted by a new technical partnership and progress in both Greenland and Denmark towards regulation for radioactive materials

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Looking south over Narsaq towards the north Atlantic

ince we last looked at Greenland Minerals and Energy A/S (GME), a subsidiary of Perth (Australia) based Greenland Minerals and Energy Ltd, a great deal of progress has been made. To recap, GME entered the Greenland scene in 2007 when it acquired a majority interest in an exploration licence covering the northern Ilimaussaq Complex, subsequently increasing that to 100 percent. The Kvanefjeld is the largest global example of a uranium and rare earth deposit, so it contains two of the most

S

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sought after groups of raw materials, Rare earth elements (REEs) in particular make up a group of metals that have properties that are needed in mobile communications, battery technology, green energy generation, superpowerful magnets, smart lighting and a host of other up and coming technologies. Currently China has a massive lead in the mining and downstream exploitation of rare earths. It controls more than 90 percent of global REE production, and. The quota system by which it has controlled the market


Greenland Minerals and Energy

“In April we signed a MoU with NFC with the aim working together to establish a Strategic Cooperation Agreement”

today has discouraged the growth of these industries in the western world and skewed the market, so any major alternative source that is accessible and reliable is bound to create a buzz. With the scale to supply at least 30 percent of the urgent and growing need from European and North American markets GME’s Kvanefjeld project is well placed to become one of the world’s largest and most cost-effective producers of these speciality metals. Only ten kilometres from ice-free water, 40 kilometres from an international

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Southern Greenland allows for almost year round exploration

airport and close to available low cost power it has a multitude of advantages, says the company’s Managing Director Rod McIllree. A major stumbling block until recently was the reluctance of Greenland and its mother country Denmark to even consider mining radioactive materials. Because the REEs are associated with uranium they could not be extracted under the former regulation, however in October last year Greenland’s parliament voted in favour of reversing that policy in the interest of establishing a viable minerals industry. The radical change not only made possible the further development of a mine and processing facilities at Kvanefjeld but sent a message to investors and the international minerals trade that GME had a future. The company had been discussing development scenarios with a number of global players over the past three years, explains McIllree, but no real progress could be made while the zero tolerance legislation was in force. One of the interested parties was China’s Non-Ferrous Metal Industry’s Foreign Engineering and Construction (NFC), which has an excellent track record in the engineering, construction and operation of mines and refineries. “Once the policy change was known they were prepared to step forward, and in April we signed a Memorandum of Understanding (MoU) with NFC with the aim working together to establish a Strategic Cooperation Agreement.” This was essentially a structure within which GME and NFC would formulate a full development scenario for a complete vertically integrated business.

“The Feasibility Study has optimised the project on what are known as the critical rare earths, dysprosium, neodymium, yttrium, terbium and europium”

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Greenland Minerals and Energy

Local Greenlandic workers

A mine, a concentrator and “The Feasibility Study has Did you know? an intermediate refinery would optimised the project on what are known as the critical rare be constructed in Greenland, earths, dysprosium, neodymium, and a dedicated separation 7,000 tons yttrium, terbium and europium” facility built in China. A jointly Target annual explains McIllree. “So we are owned marketing company production of tailoring the project to 7,000 will sell the minerals to their critical REs tons of critical REs per annum. end users. It is likely that GME That dovetails with the NFC will be a majority partner in the 956 separation facility, which is Greenland operations, a minority million tons designed to handle a similar partner in the separation (taking Total indicated quantity.” NFC is very keen to into account IP and technology and inferred get a long supply line of these – after all NFC subsidiary minerals at particular elements, he adds, Guangdong Zhujiang Rare Kvanefjeld and there are a lot of synergies Earths Company was the first with this arrangement. to achieve full separation of all Getting this agreement in place fifteen rare earth elements in was a big step forward, and demonstrates the China and is recognised globally as a leader willingness of Chinese companies like NFC to in rare earth separation technology). The move forward in a rapidly changing rare earth marketing company would be split evenly landscape. With a major overhaul of regulations between the JV partners. inside China, the top Chinese rare earth groups Though all the rare earths are present at are looking to align with high-quality offshore Kvanefjeld, not all are economically viable.

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“We now have enough money to fund the application and complete the bankable feasibility study and we expect to lodge the mining licence application early next year” projects and Kvanefjeld is a clear standout. It also demonstrated their confidence that obtaining the mining licence, or exploitation licence, is something of a formality, given the amount of work and political capital that has

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been put into the project thus far. “We now have enough money to fund the application and complete the bankable feasibility study and we expect to lodge the mining licence application early next year.” He adds that if


Greenland Minerals and Energy

Looking north up the Narsaq Valley

nothing untoward is identified it should take no more than a year to approve and grant the licence, opening the way for construction to start at the beginning of 2016. And problems are unlikely. The environmental and social impact assessments (EIA and SIA) are close to being finalised. The EIA report, compiled by Danish consultants Orbicon will cover the entire exploitation period from mine development prior to the mine start, going back to the 1970s, until closure of the mine and a subsequent monitoring period. Grontmij, also a Danish firm, has worked with GMEL on establishing

the baseline studies for the Kvanefjeld SIA since 2010. It has a deep understanding of social issues affecting Greenland and will look at the amount GEM has injected into the local economy through direct and indirect employment and procurement. The company has sponsored local sporting and community events, purchased computers for local schools and an internet cafĂŠ, and holds public information seminars to address any concerns and keep local people up to speed with its operations and plans. The mining licence is about more than this, though, and is complicated by the fact

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The first drill holes were set up in 2007

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Greenland Minerals and Energy

“I simply refuse to be the victimised people of climate change… we have the right now to our own underground” Aleqa Hammond

that though the country has given the green light to uranium production and export it does not yet have the regulatory framework in place to become a player in the global trade in radioactive materials and meet the demands of its international regulator the International Atomic Energy Agency (IAEA). As for uranium mining, processing and marketing, GME has recently appointed a respected uranium consultant James Eggins as its Manager of Uranium Marketing to take forward its increased focus on developing the uranium business strategy. Over the coming months one of the priorities will be to strike an agreement with a uranium end user, probably a nuclear energy utility in Europe or North America. The uranium can in any case only be exported to countries that need uranium to produce clean energy in their nuclear power plants, and only if those countries have signed the Nuclear Non-Proliferation Treaty controlled by the IAEA. Rod McIllree is hopeful that this framework approved by the Danish and Greenlandic governments before the end of the year. “Without the rules and regulations to facilitate a uranium-based application our own application clearly can’t be approved, but I think the situation is closer to resolution than most people realise – a lot of work has gone into it.” Greenland is joining a well

Exploration campsite

established uranium-producers club and can take the existing IAEA framework, to which countries like Namibia, Australia and neighbouring Canada already adhere. Apart from amendments to suit local conditions, it is largely a plug and play exercise. The government is 100 percent behind the change. As prime minister Aleqa Hammond, has said: “I simply refuse to be the victimised people of climate change … we have other options than just hunting. We have the right now to our own underground.”

Greenland Minerals and Energy

+299 66 14 94 gme@gme.gl @GreenlandMining www.gme.gl

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Pes

Service i

Pesco believes that different industries require a concept it has been delivering in Chile for

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sco

in action

e customised solutions, products and services, r more than 15 years and is now exporting

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National crane

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hile is one of the most stable, competitive and fastest growing economies in the world, and certainly holds that position within Latin America. In 2013 Chile’s maintained its positive recent growth rate, recording 4.1 percent increase in its GDP – just a little lower than last year but still an enviable figure. Much of that growth has been driven by the country’s mineral resources, with the state mining company Codelco accounting for a third of the nation’s economy. It has been a benign environment for the growth of Pesco, Chile’s leading equipment supply partner. Founded in 1998, it has grown to a medium sized company with a turnover in excess of $60 million. Its early development and its customer base was established mainly in the municipal sector, with contracts

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But to return to Chile’s current mining boom, despite the diversity of its client base it is not surprising that mining is rapidly becoming the major contributor to Pesco’s expansion. Mining related business now contributes a third of its turnover and about the same proportion of the company’s profits. Inevitably a good amount of equipment supplied by Pesco ends up working on the operations of Codelco, though it is not Pesco’s model to partner directly with the end user but rather through a third party, usually a leasing company. The company supplies mine operators and mine construction companies, helping them to meet their contractual obligations to the principal, whether a state mining operation or one controlled by inward investors. It is not Pesco’s model to partner directly with the end

“Pesco became the partner of choice when it came to specialised mobile equipment, as opposed to standard ‘off the shelf’ products” to provide equipment needed to support infrastructure and general services, from refuse collection, firefighting and electricity networks to water services and dust control. Through these services Pesco became the partner of choice when it came to specialised mobile equipment, as opposed to standard ‘off the shelf’ products. It holds agencies for an impressive list of manufacturers from the United States, Europe, Australia, Canada and a host of other sources – wherever, in fact, the best equipment for the job is to be found. With forestry being such an important industry, not just in Chile but in South America generally, it made sense for this expertise to be sued in developing solutions in that industry too. Today many logging operations in the region depend on machinery supplied by Pesco.

user but rather through a third party, usually a leasing company. The company’s growth has been achieved using two basic principles, development of markets to increase the volume of business done, and the addition of new products to the range in response to customer requests – a policy that has resulted in a relationship with more than 30 international brands from the German hydraulic lifting and loading specialist Palfinger through Elliott, the American truck mounted crane and aerial work platform manufacturer, and the French fire protection company Desautel to Helesi, the Greece/UK supplier of refuse bins. These examples are just a taster. The company goes to great lengths to source the right equipment for its clients visiting OEMs that

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may be interested in establishing a presence in Chile, and attending trade shows in China, Europe and America. It is a dynamic process and Pesco does much more than source the equipment itself. It has a strategy to become an expert in every product it sells, training its own employees either by sending them to the manufacturers’ premises or by bringing their technicians to Chile. Often a product imported for one client will turn out to have applications in another sector or application. Fire trucks, for example, are used by municipal fire services, on mine sites, and also in forestry operations. In fact it’s hard to think of any large operation that does not have to think about fire hazards. Much of the equipment supplied is for cleaning of a specialised nature (municipal cleaning, mine sites etc), so vacuum trucks


Pesco

Movex Minidozer

“Pesco has a strategy to become an expert in every product it sells, training its own employees either by sending them to the manufacturers’ premises or by bringing their technicians to Chile”

figure large in the list, whether for cleaning the shovels and large plant in the mine, or in another version, adapted for conveyors. One particularly hazardous operation used to involve cleaning beneath moving conveyors: now Pesco is supplying a new remote control mini shovel from Movex that physically distances people from the conveyor – with

safety the number one priority in today’s mines this product is attracting a lot of interest. Among other recently supplied equipment are fire trucks and safety equipment destined for Codelco’s Andina project, vacuum trucks for Siemens working at a Codelco/Rio Tinto joint venture, further vacuum trucks for services contractor Sierra y Plaza and

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telescopic cranes for the leasing company Relsa for the world’s biggest copper mine, Codelco’s Chuquicamata. In order to extend its range of specialised cleaning equipment, Pesco has introduced Altec insulator-cleaning equipment – essential for clearing the power supply lines to the mining facilities. With stock valued at around $20 million on its books, this is a capital-intensive business.

During 2012 Pesco augmented its main six-acre Santiago facility, with its five office buildings and 50,000 square feet of warehouses and workshops, by opening two subsidiary sales and service depots. These are strategically placed at Los Ángeles to the south and Calama to the north, giving excellent access to clients operating anywhere in the 2,700 miles northto-south extent of Chile’s territory.

“Pesco already supplies a forest trailer to Uruguay, assembled in Chile using only key components that are imported”

The Hurricane 755 trailer mounted industrial vacuum

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Super Products industrial vacuum

The company has grown to a position where it can satisfy its domestic markets adequately. From here on in any major growth will probably be seen beyond the borders of Chile. Peru is the first target, and Pesco is actively looking for the right partner to help it grow from a base there. Each country has its own culture and way of doing business and it will be essential to integrate local knowledge with Pesco’s unrivalled expertise and scale in the region. For now the most attractive economies are the mining ‘tigers’ of the Pacific coast – Peru, Ecuador and Colombia. Pesco does have a dealership in Uruguay however at present this is mainly concerned with forestry products. Another step that may recommend

itself to Pesco is the local assembly or even manufacture of certain items. Pesco already supplies a forest trailer to Uruguay, assembled in Chile using only key components that are imported. That model could be extended, with Chile becoming a platform for supplying such equipment, value added, to many South American countries, on much more favourable terms where import duty is concerned.

Pesco

(56-2) 2829 9600 info@pesco.cl www.pesco.cl

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CAA

Delivering Zimbabweâ&#x20AC;&#x2122;s

The Civil Aviation Authority of Zimbabwe (C and is now working under new directio 72

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CAAZ

modern air services

CAAZ) has passed through interesting times on to meet Zimbabweâ&#x20AC;&#x2122;s economic needs BE Monthly [ Oct 2014 ]

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AAZ was established on January 1, 1999 as the civil aviation agency of Zimbabwe. It took over the role of the then Department of Civil Aviation, a direct government entity, and it still operates under the control of the Ministry of Transport, but as an arm’s length statutory body, or parastatal organisation that works as a commercial organisation. The head office of CAAZ is at Harare International Airport, from where it has oversight of eight regional airports including two international sites. These are Joshua Mqabuko Nkomo Airport, located 20 kilometres east of the second largest city in Zimbabwe Bulawayo, and Victoria Falls Airport, which serves the tourists who come in their droves to visit what is arguably

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regenerating. Its new terminal building, which is designed to handle 1.5 million arriving and departing passengers a year, was commissioned on the 22nd of December 2013 by the President of the Republic of Zimbabwe, Robert Mugabe. It is no secret that Zimbabwe’s economy is struggling to recover from a difficult period of high inflation and contracting investment. It is still not an easy environment for an organisation with a large and diverse remit to establish sound commercial practices while continuing to invest in new technology and infrastructure that is needed to keep the business and tourist sectors working smoothly. With this in mind, and to some acclaim from the public, in May 2014 the Transport minister Obert Mpofu appointed a new board

“As a regulatory authority, the board needs to ensure effective control and regulation of the operations of aircraft in and over Zimbabwe” Africa’s greatest natural attraction, Mosi-oaTunya. Victoria Falls Airport is at present open for just twelve hours a day. The existing runway is capable of handling aircraft up to B737 or A319 or equivalent, however, plans are underway to construct a new 4,000 metre runway that will allow larger aircraft to use the airport. This will mean that the Victoria Falls can be accessed directly by long haul flights from the Americas, Europe and Asia. The expansion of the airport will also include the construction of a new international terminal building and the current one will be converted into an exclusive domestic terminal. JM Nkomo Airport is the gateway to Zimbabwe’s main industrial city. Bulawayo, with its large manufacturing base, currently

to spearhead a revival of CAAZ. He tasked the new board with growing CAAZ to support the country’s five year plan for accelerated economic growth, known as the Zimbabwe Agenda for Sustainable Socio-Economic Transformation, or Zim Asset: October 2013 - December 2018. Zim Asset aims to “achieve sustainable development and social equity anchored on indigenisation, empowerment and employment creation, which will be largely propelled by the judicious exploitation of the country’s abundant human and natural resources.” The programme, which runs from 2013 up to 2018, has a results-based agenda built around four strategic clusters that it hopes will enable Zimbabwe to achieve economic growth and reposition the country as one of

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the strongest economies in the region and Africa – a position it undoubtedly has the potential to fill. The four strategic clusters are food security and nutrition; social services and poverty eradication; infrastructure and utilities; and value addition and beneficiation. Each one of these depends to some extent on good transportation infrastructure, which falls directly under the third category. However food security and bringing back into Zimbabwe more of the downstream value of its natural assets clearly require inward investment and industry development that cannot happen without efficient international airline services. Perhaps stating the obvious – though it had to be said – Mpofu stated: “As a regulatory authority, the board also needs to ensure effective control and regulation of the operations of aircraft in and over Zimbabwe, provide air navigation services including air traffic control in Zimbabwe airspace and any areas outside Zimbabwe for which the authority, pursuant to international arrangements, is responsible for providing such services.” The new board is also expected to spearhead the unbundling of CAAZ to create an airport operations company which will take effective charge of all aviation infrastructure. This will enable the organisation to focus on its regulatory activities in line with international practices, he said.

Airfield Solutions (Pty) Ltd Airfield Solutions (Pty) Ltd is a renowned airfield lighting company based in South Africa. Globally ADB Airfield Solutions is a world leading airfield technology company providing end-to-end, integrated and sustainable solutions for visual guidance. With a worldwide presence, and a 65 year legacy in airfield lighting and other solutions. For more information about ADB, please visit our website at: www.adb-air.com

“There’s no doubt that the world’s carriers would like nothing better than to see Zimbabwe become as efficient as South Africa”

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© Kounosu

admonitions seriously. In July it announced There’s no doubt that the world’s its intention to embark on an ambitious carriers would like nothing better than to plan to rehabilitate all the airports and see Zimbabwe become as efficient as, say, airstrips in its portfolio using South Africa and allow them to a public private partnership use Harare as a hub for their Did you know? (PPP) approach. The money sub-Saharan routes. The ninth that has already been spent at Route Development Forum for 40 Victoria Falls is part of a plan Africa, hosted in June this year Airlines attracted to upgrade Kariba, Buffalo by CAAZ, accordingly attracted to June summit Range and Joshua Nkomo no fewer than 40 airlines and at Victoria Falls airports. “We are rolling out more than 300 delegates. a plan which is systematic, The Strategy Summit was 1.5 million phased and planned,” said addressed by Minister Mpofu, Annual passenger CAAZ chief executive Mr David as well as Zimbabwe’s vicecapacity at Chawota. Putting tourism president Mrs JTR Mujuru and Bulawayo’s at the top of the agenda, two tourism ministers. new terminal he added that partnership The new board of CAAZ between tourism and the appears to be taking Mr Mpofu’s

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© Aldo Bidini

CAAZ

“From here on in, the strategy will be to bring in tourists via the major three airports at Harare, Bulawayo and Victoria Falls and then distribute that traffic to the rest of the airports” aviation sector was important in unlocking economic development. The penny that has finally dropped is that connectivity is a necessity in driving economic development and growth. A case in point, Masvingo airport has been earmarked for construction of a new terminal building and runway. The province is popular with tourists because of the Great Zimbabwe ruins, which are about 30 kilometres south of the city, however, accessibility to this attraction has been affected by poor access by air due to the size of its airport. From here on in, the

strategy will be to bring in tourists via the major three airports at Harare, Bulawayo and Victoria Falls and then distribute that traffic to the rest of the airports like Kariba, Masvingo and Buffalo Range.

CAAZ

+263 4 585095 info@caaz.co.zw www.caaz.co.zw

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Aerosud

Flying high With more than 3,000 Airbus A320 and around 4,000 Boeing 737 aircraft having come off the production lines fitted with parts manufactured by Aerosud, the South African brand has truly come of age

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Airbus A400M taxiing

erosud is the biggest manufacturer of aircraft parts and assemblies on the African continent, producing 1.5 million parts and assemblies a year and on the back of an established track record of quality and delivery it has become a single source supplier for almost all of the products it supplies. It is a fantastic success story, so much so that the company was declared a strategic industrial national asset by South Africaâ&#x20AC;&#x2122;s government owned Industrial Development Corporation (IDC).

A

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On the back of this success, the present time is one of unprecedented opportunity for further growth, says Dr Paul Potgieter, Executive chairman of Aerosud Holdings. â&#x20AC;&#x153;We decided that it is now time to reposition for the future, and we identified two main goals, the first of which was to upgrade our broad-based black economic empowerment (BBBEE) status. This is a company that is acutely aware that as a South African company we have to operate with compliance and be seen by the government as a responsible industrial


Aerosud

“Both Boeing and Airbus have ramped up production of their narrow body single aisle planes from 18 or 20 a month to numbers in the 40s”

partner.” The second goal was to position Aerosud Aviation strategically to achieve the capital investment needed to grow for further expansion, he explains. The result was that in June 2014 the business went through a comprehensive restructuring process. Having a history of involvement in the military side of aviation, Aerosud now found it had evolved into a major civil aviation supplier servicing contracts with Airbus, Boeing and tier 1 groups like USA based Spirit AeroSystems and the French

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An Aerosud employee on the assembly line

company Labinal. It made sense to unbundle these activities, so two standalone companies were formed. Aerosud Aviation remains as a wholly owned company of Aerosud Holdings, while Aerosud Aerospace Systems is now aligned to Aerosud Holdings’ shareholder, the military and security systems specialist Paramount Group. At the same time IDC confirmed its commitment to the industry by taking a 26 percent shareholding in Aerosud Holdings, strengthening this highly entrepreneurial private company strategically by aligning it with government industrial growth objectives. However IDC is also going to be a vital financial partner going forward, like a bank but more of a true partner than a commercial bank could ever be, as Johan Steyn, Managing Director of Aerosud Aviation, puts it. “In fact we have been working with IDC since 1996, but now they have an equity stake in the business and by doing that they have reconfirmed and extended their commitment to fund Aerosud going forward.” For IDC, he adds, there is a direct link between Aerosud as a company that exports close to 100 percent of its production and the government’s need to promote South Africa’s leadership in the production and beneficiation of titanium and other high tech minerals. Steyn has a state of the art manufacturing facility under his oversight, one that has for more than twelve years been accredited to AS 90100, the global aviation standard of excellence. It is constantly audited by his customers, though the onus of this has been reduced and duplication cut by the NADCAP

“We are seen by the aviation industry to be relevant, cost effective and competitive, and that can lead to new opportunities”

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Aerosud

Simulator at Aerosud’s training centre

conformity assessment scheme and lean principles, he believes. Did you know? that minimises duplicate audits “TOC is simply a stronger growth that added to everyone’s path than we believe we have workload, without adding value. achieved with lean.” $60 million Three or four years ago saw It is worth taking a closer Aerosud’s 2014 the introduction of theory of look at one particular product turnover constraints (TOC) concepts. range, track cans. These are “In the last 18 months we have highly specialised deep-drawn 14,500 started to roll out specific aluminium pressings. “Track cans Number of workshop level improvements on are banana-shaped cavities that Boeing and Airbus the back of TOC learnings,” says are let into the wing fuel tanks parts delivered Steyn. “It is about prioritisation to receive the leading edge monthly mechanisms and the principles of flap supports when these are managing flow improvements as retracted,” he explains. “So they opposed to capacity balancing are absolutely flight-critical. We - it is both an improvement initiative and a manufacture these for the A320 and A350 and pillar of the business going forward. We they are high volume in our terms - there are have upskilled ourselves to take that process 22 of them on each A320.” This component is forward.” It’s an example of choosing what currently manufactured in the USA on a press works for Aerosud, he adds, rather than do developed in cooperation with the supplier things as they have always been done in the there. The resulting 16-10-7BD Triform press industry, but there is no conflict between TOC has lowered part production costs by 25

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percent, scrap rates have been reduced to less than one percent, weld quality has been greatly improved and the overall appearance of the final parts has been significantly enhanced. During the course of 2015 that press will be brought to South Africa where it will be operated by specially trained staff. Aerosud is not struggling for work by any means - rather it is being dragged along by the booming aviation industry, says Dr Potgieter. “Both Boeing and Airbus have increased from producing 18 or 20 a month of their narrow

body single aisle planes to numbers in the 40s. Because we are a single source supplier for these aircraft that means we have more than doubled production volumes of the components.” That growth is continuing, he says. These OEMs are now talking of ramping up to 60 a month, and Aerosud will have to get ready for that, increasing capacity, capital equipment and floorspace as well as staff and training, just to service existing contracts. So far the company has been able to cope with the growth, but looking to the future,

“We have been too vertically integrated, by virtue of necessity because we do not have a broad support base in South Africa. Now is the time to start doing something about that.”

Aerosud employ a core team of experienced engineers and designers

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Aerosud

Aerosud has the largest CFRTP press system in the world with 600 ton capacity

plant expansion and rationalisation have to be tackled Potgieter emphasises. He uses the word co-location a lot. The production facilities need to be on the same site for all kinds of logistical and communication reasons, but Aerosud is running out of space in its existing facility, and crucially it cannot accommodate and support local suppliers and develop what he calls a sub-tier supply chain. For these reasons he (along with everyone in the aerospace industry) is keen to see the fruition of the long-awaited Centurion Aerospace Village on Aerosud’s doorstep. “We have been too vertically integrated, by virtue of necessity because we do not have a broad support base in South Africa. Now is the time to start doing something about that.” But if it is to spin out significant quantities of work to entrepreneurial new suppliers, Aerosud needs to be sure they are co-located.

Then, he says, they will receive the benefit of equipment sharing, training, quality, safety and production best practices. The sooner the Centurion Aerospace Village becomes a reality, the sooner this can happen. And of course this closely aligns with the government’s and IDC’s goal to promote the development and growth of a strong SME sector in South Africa. As a long-term strategic partner, IDC is in a position to help Aerosud achieve these goals, he says. Looking to future opportunities, this is a company with an amazing track record that the global aerospace industry can’t fail to have spotted. It won its Airbus contracts, both on the A400M programme and the A350 which between them account for 52 percent of this year’s turnover, without the benefit of offset leverage. “What that means is that we are seen by the aviation industry to be relevant, cost effective and competitive, and that can

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Thermoplastic part production

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Aerosud

“With CFRTP the forming cycle of a component is between four and six minutes, compared with eight to nine hours of autoclave curing for a conventional composite component” lead to new opportunities. I think the global industry is taking notice!” Airbus, Boeing, Labinal and Spirit are names to conjure with - but there are many other OEMs and Tier 1 suppliers that could be drawn in, he feels. Additionally, the national carrier SAA is in a process of fleet renewal, which will inevitably lead to increased volumes from Aerosud. There can be no complacency, no standing still in this rapidly advancing industry, he cautions. There will always be lower cost economies than South Africa and the long term sustainability of the company rests on its development of techniques that others can’t match. One way of staving off the threat from global competitors is to become a risk-sharing partner in OEM projects, as happened with the A400M project (it is worth pointing out that though the M identifies this as a military variant, the components supplied by Aerosud have nothing to do with its military capability or weaponry). The other is to create new IP around relevant technologies like the production processes it developed for continuous fibre reinforced thermoplastic (CFRTP) composites. This process allows much more energy- and cost-efficient manufacture than can be achieved with conventional composites, he points out. “For example, to illustrate just one of its significant advantages, with CFRTP the forming cycle of a component is between four and six minutes, compared with eight to nine hours of autoclave curing for a conventional composite component.”

It was a key moment this year when a new CFRTP press was commissioned, the biggest of its kind in the aerospace industry, developed by Aerosud and co-funded by Airbus. This facility will position Aerosud for the supply of large CFRTP parts and will undoubtedly add to the growth of the Aerosud manufacturing portfolio. Though make-to-print may be the order of the day for some time to come at Aerosud the emphasis is thus shifting to new technologies. Expect announcements in the coming months on advanced titanium manufacturing processes, he hints. It is easy to understand why aerospace industry loves titanium. Titanium parts are light, weigh only half as much as steel parts, but its strength is far greater than the strength of many alloy steels. Laser based additive manufacturing (LAM) is an effective way to process titanium alloys, potentially a lot cheaper than machining from solid, reduces waste dramatically, and could be a lot quicker too for the manufacture of complex aerospace parts. Meanwhile Boeing has announced the fourth renewal of its contract with Aerosud, Paul Potgieter says says. “Everybody talks about recurring business and this is it!”

Aerosud

+27 (0) 12 662 5000 info@aerosud.co.za www.aerosud.co.za

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A star in Africa Capital Star Steel Capital Star Steel SA is a subsidiary of Capital Africa Steel engaged in production of high frequency welded steel pipe for oil and gas, mining, water treatment industry

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apital Star Steel SA, based in Maputo Province, Mozambique, is a subsidiary of the South African company, Capital Africa Steel (Pty) Ltd (CAS), the company through which Wilson Bayly Holmes-Ovcon (WBHO) operates its construction materials businesses. WHBO is one of the largest construction companies in Southern Africa, listed on the Johannesburg Securities Exchange with 12,000 employees, and had a turnover in 2013 of more than R23 million. Capital Star Steel SA has a world class manufacturing plant in the Beluluane Industrial Park, Boane District in Maputo, which has a capacity to produce 200,000 tons of pipe per annum. It manufactures high frequency welded steel pipe and serves the international Oil and Gas industry as well as the mining industry across Africa, with globally based sales and distribution centres. The particularly difficult market conditions of the last two years have seen a number of companies divesting and/or closing struggling construction materials and supply businesses. It has a role as one of the key support companies for the larger divisions within the group, principally Buildings and civil engineering, a recognised leader in the South African building industry, but also to some extent Roads and earthworks division which operates across multiple traditional civil engineering disciplines. The downturn has resulted in challenging times for CAS which started to record

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â&#x20AC;&#x153;Capital Star Steel has a role as one of the key support companies for the larger divisions within the groupâ&#x20AC;?

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Capital Star Steel

“A general improvement in the contracting environment and the rationalisation that has taken place within the market are further positive developments impacting the business” after 2010. As a result, a programme of restructuring was put in place to turn the struggling business around. A new CEO was appointed to the company, certain loss-making investments were disposed of or closed, and experienced leadership teams were introduced. As a result CAS has been profitable in both 2012 and 2013, despite various once-off items negatively affecting its results. “While certain challenges remain within the pipe factory in Mozambique and the local shelving companies, a solid platform has been put in place from which to move forward,” said WBHO Chief Executive Officer Louwtjie Nel in his 2013 review. “A general improvement in the contracting environment and the rationalisation that has taken place within the market are further positive developments impacting the business.” With the turnaround strategy for Capital Africa Steel (CAS) essentially complete and a general improvement in market conditions, the outlook for CAS is cautious, but optimistic and it is expected that the earnings platform will stabilise. Key markets include: public-private partnerships (PPPs); engineer, procure and construct projects (EPCs) construction material supplies;

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Ferragem Auto JJ LDA.,

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inspired Your weekly digest of business news and views

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property investments; and gas infrastructure and sales, he added. “The group has implemented its vertical integration strategy through the Projects division, which accesses larger turnkey projects that often include design, operating and funding elements, and through Capital Africa Steel (CAS), through which the group is exposed to construction supply revenue streams in various sectors.” The Projects division has gained important traction this year through the Kathu renewable energy project and the restructuring of CAS is now complete. Both are strategically positioned to benefit from opportunities arising of the gas fields


Capital Star Steel

“The company, which operates in the construction materials sector, enables the group to diversify revenue streams as well, by participating further down the value chain” in Mozambique. The strategic focus has been to complete leadership changes in CAS and its subsidiaries. “The company, which operates in the construction materials sector, enables the group to diversify revenue streams as well, by participating

further down the value chain,” said Nel. Traditionally, margins are enhanced in this sector of the market, but a recent lack of government and general infrastructure spending, coupled with currency and steel price volatility, has impacted negatively on

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Capital Star Steel

“We aim to build an unparalleled reputation as a supplier to the South African market of cost effective and made-to-specification solutions to ERW piping needs”

the sector resulting in some rationalisation in the markets Capital Star operates in. Its strategic response of to these challenging conditions has been to realign the focus of the organisation on profitable markets. Today the South African based Sales and Distribution Division of Capital Star Steel SA is well on its way to becoming the preferred market leader in Southern Africa. “We aim to build an unparalleled reputation as a supplier to the South African market of cost effective and made-to-specification solutions to ERW piping needs.” ERW stands for electric resistance welded pipe, made from plate rolled to become a pipe and welded using the ERW process, a process particularly suited to large diameter applications. The competitive advantage of the company lies in the Capital Star Steel manufacturing plant, which has been commissioned using only the best in class machinery and equipment. Today it is run by a top-class management team with extensive big bore pipe industry expertise, therefore ensuring that its big bore steel line pipe meets world quality standards such as set by the American Petroleum Institute (API). Added strength is derived from its low cost manufacturing base, and the ideal geographical location of Maputo to supply any destination on the globe. The company has established a raw material supply chain globally and it is currently expanding its distribution infrastructure internationally. With a guaranteed constant supply of electricity from Cahora Bassa and perfectly situated

near the port harbour of Maputo, and the main arterial road lines that lead to South Africa, Botswana, Angola, Zimbabwe, Zambia and Tanzania, it have the ability to deliver “on time and in full” to any project, whether it be in Africa or anywhere on the globe. The Projects division of WBHO is pinning its hopes on bidding for hospital and serviced accommodation projects in South Africa during the current year, 2014, and is also exploring opportunities throughout Africa, helping governments to unlock funding issues regarding large-scale infrastructure developments through innovative PPP and EPC contracting arrangements. Capital Star should be able to exploit the opportunities created by the rationalisation within the construction materials sector and it is anticipated that the company will gain further market share over the course of this year. The exploitation of the large gas fields in Mozambique should also present the group with numerous opportunities. Reports suggest that the reserves could contain as much as 100 trillion cubic feet (tcf) of natural gas and the group is strategically positioned to take advantage of projects in the region.

Capital Star Steel

+258 217 30192/3/4 info@capitalstarsteel.co.za www.capitalstarsteel.co.za

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Angola

Out of th

Angola Cables is laying a cable is a project with profound impli telecommunications as

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Cables

he depths

e across the Atlantic Ocean: this ications for global and regional well as for Angola itself

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frica is often referred to as the “dark continent,” with internet and telephony penetration rates some of the lowest in the world. That, however, is changing rapidly, with projects like the West African Cable System (WACS) and the South Atlantic Cable System (SACS) being planned and deployed to deliver much-needed connectivity to the continent. Infrastructure these days is not all about roads and bridges and railways. The human race will never be able to do without long distance transportation but it can become less dependent on projects of this sort as it develops better voice and data networks. One of the most exciting telecoms infrastructure currently in the pipeline is the South Atlantic Cable System (SACS), also known as the Angola-Brazil Cable, is a planned submarine communications cable in the South Atlantic Ocean linking Luanda, the capital of Angola with Fortaleza in northern Brazil with a leg connecting to the Brazilian archipelago of Fernando de Noronha. The driving force behind the cable is Angola Cables, which was formed in 2009 by the five biggest telecoms operators in Angola. namely Angola Telecom which holds 51 percent of the capital, Unitel with 31, MSTelcom with nine Movicel with six, and Startel with a three percent holding. Its director is António Nunes, who explains the company’s mission in the simplest of terms: “We want Angola to become one of the main telecoms hubs in Africa.”

A

“Africa has tremendous opportunities, and the growth rate has nowhere to go but up!”

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“Our core business is the commercialisation of capacity in international voice and data circuits over fibre submarine cables” Angola Cables addresses the “wholesale, or bulk selling market: “Our core business is the commercialisation of capacity in international voice and data circuits over fibre submarine cables.” It is responsible for the management and development in Angola of WACS, the West African Cable System, which has a landing point at Sangano near the capital Luanda (and incidentally was originally planned to cross the Atlantic to Brazil). It also provides international telecommunications transmission to all operators in order to increase the interconnection between Angola and the world. WACS connects South Africa with London, and has fourteen landing points along the way, so it is an important link to Europe for the West African coastal states, however the decision not to link it to the Americas left a gap. As Eric Handa, co-founder of APTelecoms says, many of the markets outside of the US and Europe are becoming very saturated, and even some of the markets in Asia, particularly India and China are starting to become saturated – and as a fluent mandarin speaker who has worked for both Tata Communications and Bharti Airtel, he should know. “I think if you look at a lot of the markets, the growth rate is slowing down. But Africa has tremendous opportunities, and the growth

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Angola Cables

“The location of Angola geographically and geopolitically means it is in a situation where it can really capitalise on some of the submarine cable connectivity that is happening throughout the Middle East.”

rate has nowhere to go but up! The location of Angola geographically and geopolitically means it is in a situation where it can really capitalise on some of the submarine cable connectivity that is happening throughout the Middle East.” What he means is that many of the international telecoms operators are looking for an alternative route, and Angola is that

route. The 3,800 mile SACS cable will be the first transatlantic submarine cable in the southern hemisphere, and will allow a direct link between Africa and the South American continent. Additionally it will have onward connectivity to the USA via Miami and that is of tremendous advantage to a lot of the international operators, opening a new lane of passage for commerce and telecoms. From its

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The partnership between Angola Cables and Anglobal started in 2010 with the construction of the Cabo Ledo terminal for the lashing of the WACS underwater cable. At this stage Anglobal was responsible for the supplying of all terminal´s infrastructures, including power systems AC/DC, HVAC, security and a structured network. The participation of Anglobal was extended to the transmission equipment implementation phase, with unlimited support. Due to the necessity of implementing a Datacenter, Anglobal presented a “Full Turn Key” proposal for the supplying of the ANGONAP. After being selected to do so Anglobal finished, in record time, the work for the WACS System inauguration in Angola. Anglobal is currently responsible for ANGONAP´s infrastructures maintenance as well as for the maintenance of the terminal of Cabo Ledo. Regarding the SACS project, Anglobal looks forward to continue contributing to the growth of Angola Cables as well as to the growth of the country.

www.anglobal.co.ao

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strategic position half way up the west coast, Angola is ideally placed to drive that. Angola is already a strategic point in its development as a technology hub within the African continent, something it needs to develop if it is to establish itself as the natural route to the American markets for its neighbours. “SACS represents a completely new path between West Africa and South America,” António Nunes asserts. “We also want to develop a network in Africa, because today all the interconnectivity between African operators has been done through Europe. Our concept is to promote a truly African network and facilitate a point of interconnectivity between African operators.” Already a number of American and Chinese companies are being attracted to Angola because of its minerals, oil and natural resources. The fact that Angola is becoming more of a technology hub in the region can only help that. “Africa will have the same number of internet users as the US by 2015 and demand, while less at first, will be enormous as Africans, the world’s youngest population, are raised on technology,” says Nunes. The SACS cable is an essential part of the

new telco NEW TELCO SOUTH AFRICA is the most recent addition to the NEW TELCO group of companies operating across the global carrier landscape. NEW TELCO provides virtual and physical carrier neutral infrastructure services such as colocation, meet me rooms, technical services and equipment financing in every global location. We are technology vendor neutral and support all major technologies from SDH, Ethernet, MPLS and VOIP products. NEW TELCO owns and operates their points of presence (POP) out of over 25 datacentres globally. We enable our customers to extend and collocate their network presence in the most advantages locations world-wide. www.newtelco.co.za

“Africa will have the same number of internet users as the US by 2015 and demand, while less at first, will be enormous as Africans, the world’s youngest population, are raised on technology”

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“Angola is looking for connectivity with its surrounding neighbours to the south, north and east. It is building inland as well”

new infrastructure. As Handa graphically expressed it: “Once the highway is built you can drive the cars along it! In this case the cars are the applications carrying programmes like Skype and layer 3 services (the network layer of the OSI model). So it is a really exciting time and I think Angola Cables has a great opportunity to benefit nationally, and be the driver for ICT growth in Africa.” It is expected that the SACS will cut data traffic costs between South America, Africa and onwards to Asia by 80 percent, another massive draw for the operators. Ideally the cable would have been completed in time for the World Cup, a goal the Brazilian operator Telebras was keen to achieve. However there had been some question marks over whether Telebras would be helping to fund the construction of the project, and in February this year it confirmed that its involvement would be limited to providing the landing point at Fortaleza. Angola Cables had considered partnering with Telebras, though according to Nunes “negotiations cooled because the Brazilian company was focused only on the World Cup, but it is clear that the doors are still open for the resumption of dialogue,” It is now expected that the system will open for business early in 2016. The rest of Africa will be looking very closely at what is happening in Angola today, Nunes believes. Angola is looking for connectivity with its surrounding neighbours to the south, north and east. It is building inland as well. In addition to the submarine

cable they are also providing connectivity to locations like Sangano where the WACS and SACS will meet, and also new locations like its Angonap hub in Luanda, which contains the equipment for optical signal regeneration and terminal demultiplexing of the signals for distribution to end users. From Angonap it reaches out to the rest of Africa enabling ‘meshed networks’ so if one path is broken or goes down there is resilience in the system that creates sound infrastructure, a ‘flawless network’ which never goes down. Meanwhile Angola Cables has signed a Memorandum of Understanding (MOU) with the leading German internet exchange operator DE-CIX that establishes a long-term collaboration and creates the foundations of a new neutral interconnection environment in Angola and in the southern African Region. “Major global and local players increasingly face the challenge of promoting innovative internet services while continuing to ensure safe and effective online usage. DE-CIX has experience in developing strong internet ecosystems around the world, and we look forward to working with them,” says Nunes.

Angola Cables

+244 227 360 006 info@geral@angolacables.co.ao @angolacables www.angolacables.co.ao

BE Monthly [ Oct 2014 ]

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King Pie

Nothing but the best King Pie has grown dramatically over the 20 years since it hit the South African fast food scene: now it is expanding regionally while sticking to the principles that made it a success in the first place

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ing Pie is a South African franchise and a member of The Franchise Association South Africa (FASA), just one of a number of fast food brands one might be tempted to think, but KP demands to be taken seriously. It claims to make the best pies in the world, assuring its customers that it really does take pies seriously: “It’s easy to get caught up with cooking trends and cost charts, but we know it’s the basic things that make a good pie – freshness, quality ingredients, and value for money.” King Pie was established in 1993 and changed the pie industry with its innovative open plan pie-making concept. 30 franchises were opened in the first year. It has been part of consumers’ lives for over 20 years with a strong South African heritage. King Pie products are known for their quality, taste, wholesomeness and value pricing. King Pie is without any doubt the biggest and most successful pie franchise, with more than 280 outlets in South Africa and neighbouring countries, for example Mozambique, Swaziland and Zambia. The King Pie brand has come a long way over the past 20 years. Part of the company’s success is having a clear vision of what the King Pie brand stands for and what values it embraces. The brand makes much of its ‘royal’ connection, even though it is only in the name. “In the King Pie Kingdom everyone is royalty. Through long term meaningful relationships with our suppliers and world class support services, it is our passion to deliver feasts fit for a king. We delight in making every customer’s day by treating them as if they all wear a crown.” That is rather and ambitious target to hit consistently, so let us look at how it might be achieved. For a start King Pie claims to have the most state of the art pie factory in the world, in which every ingredient is checked rigorously and capable of being traced back to its source. The Johannesburg factory

K

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“King Pie’s 2Go outlet requ of between 30 and


uires very little retail space 50 square metres”

King Pie

has the capacity to produce six million pies per month, and has all the national and international accreditations you would expect – and then some, as it goes beyond the basic by some way with a world class food safety system that ensures product of the highest quality. The site is Halal accredited and export approved as well as being hazard analysis and critical control points (HACCP) certified. All this goes to ensure that the process is impeccable and meets the highest international standards. The pies go through 35 quality checks during the manufacturing process. Regular DNA testing is done on all the beef and chicken used, and products are tested on an ongoing basis by an independent laboratory to confirm that there are no pathogens present in the pies. Spices and ingredients are ‘Green Label”, which indicates organic quality to the delicious flavours without any chemical additives. Especially notable is that all pies are baked fresh in store to allow for the ideal meal and customer experience. All of this reassures the consumers – who are welcome to visit the factory by invitation to satisfy themselves on these points – that the food is safely prepared. But what keeps them coming back is more a matter of the quality of the content – to put it bluntly, the taste and texture of the pies. This is not just a matter of what is put in – paradoxically it is also a matter of what is left out. For a start, then, the fillings contain 100 percent pure beef and chicken with no meat replacers or soya. The crusts of the pies are made with 84 layers of transfat free traditional flaky puff pastry which contains no rising agents such as baking powder or yeast. And before the pies are released for consumption by the public, each batch is tested by real people! A panel of four people has the enviable job of testing and tasting the pies and only after their approval

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Superior Juices Manufacturers of various flavours Superior 100% fruit juices and Purified Water. Personalised service with free delivery in SA. Tel: +27118235254 | E-mail: gerriejr@snackajuice.co.za www.snackajuice.co.za

Commercial Publishing Ser vices

ITâ&#x20AC;&#x2122;S TIME TO FOCUS ON YOU

Introducing our new commercial publishing services team Would you like to have your very own corporate magazine or newsletter? We can help you with your publishing needs from CSR, Sustainability or annual investor reports to your employee or shareholder handbooks. Whatever you need, we would love to help

[ Click here to find out more ] or email [ mday@bus-ex.com ]

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Snack-A-Juice Snack-A-Juice supplies a high quality product to various consumers and independent outlets. Their experience in dealing with V.I.P. clients resulted in a thirst to provide a product that won’t be challenged in the market and eventually lead to brand insistence. The factory is based in Hughes Park, Boksburg, where all of the exclusive superior quality fruit juices are manufactured. SnackA-Juice specialises in supplying various 100% fruit juices, purified still and sparkling water, with a wide variety of flavours to suit all tastes. The fruit juices are nationally distributed and/ or produced. The product can be found in mot service stations (listings with BP, Engen, Exel, Sasol, Shell and Total), including hotels, Spars, King Pie and various other outlets. www.snackajuice.co.za

“In the King Pie Kingdom everyone is royalty” has been given is that batch released for distribution to nearly 300 outlets in the King Pie franchise family. Reasons for entrepreneurially minded people to join this family are not hard to find. This is a dynamic company that is consistently upgrading and extending its product range. It is a franchise-friendly company offering relatively low set up costs when compared with others in the quick service restaurant (QSR) sector. It’s a well promoted brand, with an active presence on Facebook and other social media as well as some very fetching TV ad coverage including its very successful ‘Mnandi-licious!’ campaign. New franchisees join a market leader with a well established King Pie Training Academy, a network of more than 290 outlets. They will be offered support staff to assist across all disciplines; operations, legal, marketing, training, finance and R&D assistance. Finally they are accessing a value for money product range for all income groups and appetites. King Pie outlets are easier to operate compared to other brands, and its 2Go outlet requires very little retail space of between 30 and 50 square metres. This is the ideal space filler for any landlord and a great way to get one’s foot into a fast growing industry.

King Pie

+27 (011) 564 9701 info@kingpie.co.za @Kingpiebrand www.kingpie.co.za

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ITâ&#x20AC;&#x2122;S TIME TO FOCUS ON YOU

Commercial Publishing Services Introducing our new commercial publishing services team Would you like to have your very own corporate magazine or newsletter? We can help you with your publishing needs from CSR, Sustainability or annual investor reports to your employee or shareholder handbooks. Whatever you need, we would love to help

[ Click here to find out more ] or email [ mday@bus-ex.com ]

Profile for Business Excellence Magazine

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October 2014

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October 2014

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