October 2010 EMEA magazine

Businessexcellence ACHIEVING

OCTOBER 2010

O N L I N E

www.bus-ex.com

Never

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Brussels-based EFQM adapts to today’s business environment, while looking ahead to tomorrow

Editor’s letter

EDITORIAL

Editor In Chief Martin Ashcroft mashcroft@bus-ex.com Managing Editor Becky Done bdone@bus-ex.com

DESIGN

Production/Creative Director Zachary Smith zsmith@bus-ex.com Production Designer Mallory Lindsley mlindsley@bus-ex.com

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BUSINESS

Director of Editorial Research Scott Mason smason@bus-ex.com Director of Sales Sean Brett sbrett@bus-ex.com Assistant Research Directors Vincent Kielty vincent@bus-ex.com Sam Howard showard@bus-ex.com Richard Halfhide rhalfhide@bus-ex.com Robert Hodgson rhodgson@bus-ex.com Administration & Operations Alice Doran adoran@bus-ex.com Chief Executive Andy Turner info@bus-ex.com Subscriptions info@bus-ex.com

Infinity Business Media Ltd Suite 22, St Francis House Queens Road Norwich, NR1 3PN UK Tel: +44 (0) 203 137 7100 Fax: +44 (0) 1603 666466

True survivors in business are made of tough stuff. They refuse to wallow when the chips are down, choosing instead to dust themselves off and start again.

And they never give up, remaining convinced that one day the tide will turn in their favour.

In the mid-1990s, Cluff Resources made the biggest gold discovery in Africa since the Second World War— now the Geita mine in Tanzania. Geita could have been the discovery of a lifetime; but attracted by its potential, Ashanti Goldfields made a bid for Cluff Resources, acquiring it and going on to exploit the Geita find.

But founder Algy Cluff was undeterred.

He went on to start a new company— Cluff Gold—which now employs around 600 people. Its success is evidenced by its flagship Baomahun Gold Project in Sierra Leone, projected to produce 160,000 ounces of gold a year.

By 2008, a squeeze on cash flow at South Africa’s Metcash was seeing supplies

suspended, shelves going empty and dissatisfied customers turning their backs. But recently-appointed CEO Peter Dodson refused to give up, struck by the idea of converting the brand into a hybrid wholesaler/retailer. The concept attracted fresh investment from the banks, and a large-scale conversion of the once-ailing stores is now underway.

Sadruddin Hashwani, founder and chairman of the Hashoo Group, which owns Orient Petroleum International Inc., has refused to allow his faith to be shaken in Pakistan’s future— despite the recent floods. “We have natural resources, our people are hard working and level headed, and the country will recover and be prosperous again,” he says. Indeed, there can be no better indication of his confidence in Pakistan’s future than his newly-built Pearl Continental hotel at Muzaffarabad.

Perhaps these survivors are also risktakers; but their stories certainly make for inspiring reading.

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SPECIAL FEATURE: The luxurious art of discretion Celebrating its 20th anniversary this year, The Lanesborough has an enviable reputation for quality and service.

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STRATEGY: Never standing still Brussels-based EFQM has been busy adapting to today’s business environment—and looking ahead to tomorrow.

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OPERATIONS: A safe pair of hands Outsourcing your non-core processes can save you time and money, leaving you to focus on what you do best.

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SUPPLY CHAIN: Simple answer to a complex problem Trading electronically makes sense for buyers and suppliers; but technical complexity can be a barrier.

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SUSTAINABILITY: A feel-good investment Making a sound investment doesn’t have to mean that ethical considerations go out of the window.

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Cluff Gold An African odyssey Cluff Gold brought two gold mines to production during 2008 and is set to develop a third, larger prospect.

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Zinkgruvan Mine A loyal operation This Swedish mine demonstrates sensitivity to the surrounding area, prompting loyalty from its workforce.

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Invensys Transforming India This Indian company develops and delivers real-time control solutions addressing pressing production dilemmas.

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Bombela Concession Company: Gautrain High speed and on track The Gautrain Rapid Rail Project heralds a new era of transport for the residents of Gauteng, South Africa.

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Olayan Descon Complete responsibility This company is expanding its construction and maintenance capabilities to support Saudi Arabia’s industrialisation.

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OPII Oil and troubled waters Having purchased Shell’s LPG marketing assets in Pakistan, this petroleum company is continuing to prosper.

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Metcash The hybrid solution Adopting an innovative business model has helped this South African retailer turn its fortunes around.

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SANRAL Timed to perfection Landing the World Cup brought some challenges to the planning of the Gauteng Freeway Improvement Project.

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Haw & Inglis Civil Engineering (Pty) Ltd The road to success This company has been working hard to help build up South Africa’s engineering and technical expertise.

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Schindler South Africa Escalating growth South Africa’s construction boom prompted this company to review its approach to business, transforming operations.

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Transnet: Capital Projects The waking giant Transnet Capital Projects is investing billions of rand in transforming South Africa’s transport infrastructure.

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HPPCL A cleaner state of affairs This power corporation is tackling the social and environmental challenges of sustainable power generation.

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Arabian Bemco Converting oil to electricity Saudi Arabia has an insatiable appetite for electricity, turning one local business into an international giant.

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Lafarge Cement Zambia International cement relations This subsidiary of the world’s largest building materials supplier is a major player in Zambia’s construction industry.

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ZESCO Harnessing hydroelectricity The world is waking up to the idea of green power—and power utility ZESCO is at the forefront of the changes.

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Great North Transport Driving the bus industry This company has driven home a competitive advantage based on its reputation for safety and reliability.

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Source China By word of mouth For companies attempting to source directly from China, this company provides both products and valuable expertise.

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Catalpa Resources Ltd Bold gold producers The meteoric growth of Perth-based Catalpa Resources is down to a solid strategy and a culture of excellence.

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Frontier Mining Rising from the ashes This Kazakh company has undergone an amazing turnaround, going from bust to boom in just 12 months.

The Kraljevica Shipyard History in the making This shipyard faces a new wind of change as Croatia prepares for entry into the European Union.

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Flexicon Piping Specialists Success in the pipeline This piping specialist is playing a role in infrastructure development as Africa takes its place on the world economic stage.

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Kenya Bus Service Management Ltd The higher road Kenya’s transport service poses challenges to bus operators; but one company is making a real difference in Nairobi.

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Red Crescent Resources Eastern promise The metal and mineral resources of Turkey have been under-exploited for decades; but all that is about to change.

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Pike River Coal Winning the uphill battle For this mining company, New Zealand’s geology has necessitated tunnelling uphill and a reliance on water.

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Biocon Pharmerging The new buzz in the pharmaceutical industry is how best to capitalise on demand from newly affluent emerging markets.

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Celebrating its 20th anniversary this year, The Lanesborough is renowned for quality and service. Front of house manager Michael Naylor-Leyland explains to Gay Sutton how this enviable reputation has been achieved

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ou could not ask for a better London address than the heart of Knightsbridge, looking out over Wellington Arch and Hyde Park.

Ideal for shopping, dining, leisure and entertainment, the area is replete with some of London’s best hotels, and The Lanesborough is one of the best—but with a difference. “We like our guests to feel that this is their home while they are with us,” explains front of house manager, Michael Naylor-Leyland.

It’s a strategy that has proven very successful. The hotel’s many regular guests return again and again, attracted by the discretion of the staff, the quality and comfort of the five star offering, and above all, the personal service they receive. There have been numerous accolades, including the Travel and Leisure 2010 Number One Small City Hotel in Europe; the Condé Nast Traveller 2008 Best UK Leisure Hotel; and the Best New Hotel Bar in the UK from the Imbibe Hotel Bar Awards 2009.

The hotel comes with an interesting history. Built in 1719 as a home for Viscount Lanesborough at a time when London was largely confined within the old city walls, it was transformed into St George’s Hospital on Lanesborough’s death. Then in 1825, William Wilkins, the architect famous for designing the National Gallery and University College London, was called in to redesign and update the building, transforming both the interior and exterior to the current regency style.

At about this time, the hotel also acquired its current illustrious neighbour— Apsley House—home to the Dukes of Wellington and popularly known by the address Number One London. It was not until 1990, however, that The Lanesborough’s final transformation was completed and it opened as a hotel.

As a Grade II listed building the transformation into a hotel was by necessity both sensitive and lavish. The exterior remained untouched in the regency form created by William Wilkins, while the interior was extensive in recreating the height of regency style and elegance. Meanwhile, state-of-the art comforts such as underfloor heating and spa baths were discretely installed, providing all the luxuries of modern living in an authentic period setting.

The ethos of the hotel is what makes it unique—it aims to provide all the comforts of a home away from home. The interior therefore does not resemble a hotel, and the welcome guests receive is no less than they would expect were they guests in a private residence. In fact, when entering the hotel for the first time, guests can be forgiven for wondering where reception is—there are simply two beautiful and discreet desks with no technology visible.

Guests are escorted straight to their rooms and checked in there. “There is therefore no signage anywhere,” explains Naylor-Leyland. “If a guest wants to know where something is, one of the team will take them there.” Throughout their stay, guests also enjoy the services of their own personal butler who will see to their creature comforts.

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Special feature: The Lanesborough

This quality of service requires impeccable attention to detail and the services of a large team of dedicated staff. And many of those at The Lanesborough have been with the hotel since its launch. “Of our 300 employees about 30 have been here since the opening, and they hold key positions such as the doormen, the night manager, the executive head chef and the concierge. They are in fact the face of the hotel,” says Naylor-Leyland.

Such continuity adds significantly to the sense of stability and belonging. “This high staff-toguest ratio also means that we’re hardly ever rushed when dealing with guests,” Naylor-Leyland continues. “We can make them feel more at home because we can spend more time with them. And that’s the key to our high level of service.”

There are currently 95 guest rooms including 43 suites that range from the luxurious Royal Suite—three bedrooms, a drawing room, dining room, study and kitchen—through to a number of Buckingham, Grosvenor, Apsley and Junior suites. And these are supplemented by a range of deluxe and executive rooms.

Each room is fitted with a full suite of state-ofthe-art technology concealed within the period 1820s furnishing, intelligently combining the luxury and elegance of the old with the convenience of the new. Laptops, for example, are provided in each room, while there is wireless internet connection, access to a digital music library and television. Meanwhile, there are six superb private dining rooms that can be arranged in a variety of formats for private functions, all drawing on the superb cuisine of the hotel’s renowned chefs.

The interior design of the hotel is continually being updated and improved. “When the hotel opened, we had a restaurant called The Conservatory which was modelled on Brighton’s Royal Pavilion, and it was completely extraordinary,” Naylor-Leyland says. “Two years ago we completely redesigned The Conservatory and created a restaurant called Apsleys, after our neighbour.”

The original glass conservatory roof was retained but the interior was completely stripped out. Gone are all the Chinese lanterns and prints, and the green and pink colour schemes. They have been replaced by something much more contemporary and formal in maroons, beiges and browns. “You would never know it was the same room but for the glass roof,” says Naylor-Leyland.

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Another innovation at The Lanesborough is a first for London—the creation of a luxury outdoor smoking room housing an extensive collection of Cuban and pre-Castro cigars. Called The Garden Room, it incorporates everything you would expect of a regency salon—but out of doors.

“Building this was quite a challenge,” NaylorLeyland admits, “because of our listed building status. But our managing director Geoffrey Gelardi came up with the idea. We utilised what used to be a sunken garden and installed underfloor heating and an open fire, then partitioned off part of one of our function rooms and converted it into the indoor bar area. And there is nothing else like it in London.”

One of the real jewels in The Lanesborough’s crown, however, is the quality of its cuisine. Two years ago, the catering was divided into two sections. Executive head chef Paul Gaylor, who has been with the hotel since inception, took charge of in-room dining and private-dining; while Heinz Beck, the chef with three Michelin stars to his name, was lured from the La Pergola Restaurant at the Cavalieri Hotel in Rome, to take over Apsleys.

“The new Apsleys restaurant is entirely high Italian cuisine, and is an exciting new addition for us,” Naylor-Leyland says. Attempting a culinary leap of nature was something of a gamble but it has paid off handsomely. Apsleys, a Heinz Beck Restaurant, was awarded its first Michelin star this January.

The Lanesborough is never likely to stand still.

Its reputation is built on providing the very best, and tastes and needs are constantly changing.

Over the past 20 years, The Lanesborough has established an extensive marketing network that spans Europe, North America, the Middle East and Russia, and is now reaching into the Far East; however, much of the marketing is achieved purely by personal recommendation and word of mouth. And in any business, there can be no greater recommendation than that. www.lanesborough.com

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Special feature: The Lanesborough

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The Brussels-based EFQM, formerly the European Foundation for Quality Management, has had a busy 12 months—and its schedule for the coming year doesn’t look to be any less hectic either. Becky Done finds out what changes the Foundation has made in order to reflect today’s business environment, and how it is looking ahead to tomorrow

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ith organisations across the globe jostling for position in today’s altered business line-up, having that competitive edge—and being able to both retain and use it—has perhaps never been quite so important. Management consultancies have identified the current climate as being one for rich pickings—and as companies struggle to recover from the events of the past couple of years and re-organise themselves, there is much low-hanging fruit for the consultants to feast upon.

But there is another way for organisations to achieve excellence—and at a fraction of the cost. Backed up with the firepower of more wide-ranging expertise than one management consultancy could ever realistically offer is the EFQM, based in Belgium.

EFQM is a not-for-profit membership foundation with more than 500 members across more than 55 countries and 50 industries. The foundation provides a platform for organisations to learn from each other and offers the potential for improved performance.

The EFQM Excellence Model is a well-recognised framework for excellence and is the most widely used management model in Europe, having been built up from the experiences of EFQM members over the past 20 years. It aims to enable companies to assess where they are on the path to excellence by helping them to understand their key strengths and potential gaps in relation to their stated vision, mission and strategy. By providing a common vocabulary and way of thinking about the organisation, the effective communication of ideas is facilitated, both within and outside the organisation.

To some, the idea of bringing in a new framework may seem daunting, especially if they already have systems and processes in place that seem to be adequate for the job. However, the EFQM Model can act to integrate existing and planned initiatives, removing duplication and identifying gaps. By providing a clear and basic structure for the management system, it will enable the organisation to have a well-defined and constant purpose and thus help focus the delivery of results. The Model aims to help organisations concentrate on systematically applying processes and fact-based assessments that help to make strategic decisions.

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Strategy

The Model takes a holistic view, in recognition that excellence is not all about numbers and systems—far from it. “The EFQM Model will identify what an organisation needs to do to develop people and maximize their potential,” explains EFQM CEO Pierre Cachet. “It does not prescribe methods or ways of working, such as six sigma or lean. With the EFQM Model, every organisation can interpret the best method for themselves, based on the industry or culture that they are working in.”

group marketing director of Strix, one of the member company participants, said: “The EFQM framework is taught as a support to making strategic linkages throughout the organisation: I went away convinced how such an approach could be practical and useful to my company.”

Tommy Boberg, director of Business Planning, VCCS, Volvo Car Corporation commented: “Overall it was very valuable to us to have this external input into our strategy and approaches.

We are actively working on implementing the

“The EFQM Model will identify what an organisation needs to do to develop people and maximize their potential” And that is key to what makes the Model work.

It is not an inflexible prescription, based upon rigid theories—however fashionable or groundbreaking such theories may be. “What makes the EFQM Excellence Model special is that it is created by organisations for organisations. It is a practical business model, not just theory—it comes from the ‘real world’,” explains Cachet.

One company that can testify to this is Volvo Cars, which has a long history working with the EFQM Excellence Model and EFQM as an organisation. Last year, participants from EFQM member companies took part in the EFQM’s 10th Leadership Development Programme, hosted by Volvo. Participants were given full access to the Volvo Car Customer Service (VCCS) strategic plan (having signed a confidentiality agreement), a detailed account of the actions underway and of the results achieved by VCCS in different market segments and functions.

Participants explored the strategy and operational organisation of the After Market division of Volvo on a worldwide basis. Using the EFQM Model and tools, an investigation into the effective implementation of strategy was undertaken. Over 30 interviews were conducted with individuals representing all the major functional areas, and the team then presented their findings to the senior managers of VCCS and engaged them in a workshop to identify and agree practical ways in which they could implement the findings. The reaction was immediately positive from the Volvo team: a further review with senior management was agreed, and a commitment was made to review and implement the recommendations.

Commenting on the programme, Mark Finnie,

recommendations as part of the ongoing roll out of the strategic review programme.”

The EFQM Model itself underwent a strategic review last year, in order that it could more accurately reflect today’s business environment.

“Because we reviewed the model during a difficult economic time, we have been able to identify the essence of business and the most essential parts in our EFQM Model,” explains Cachet. “Hence, now, we have taken out the ‘nice to haves’—the Model is now ‘no-nonsense’.”

The changes were well-needed, given the transformation that many organisations underwent in response to the global economic crisis. New priorities emerged for business leaders; and the review of the model aimed to recognise these.

“They realised that growth is not the only goal and became aware of their environment’s limitations, their dependencies on others and their own restrictions,” says Cachet.

The emerging trends and topics that needed more emphasis within the model or that were newly introduced included, among others, creativity and innovation; sustainability; corporate governance; organisational agility; risk management; promoting products and services; and supplier management.

There was also a drive to simplify the language used.

“The results criteria now place an increased emphasis on key results required to achieve the organisation’s vision and strategy and require an evaluation of how these will be sustained into the future,” adds Cachet. “We have made a more consistent distinction between outcomes (focusing on what is achieved compared to what was stated in the strategy) and indicators, which can be used to predict future trends.”

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Strategy

But the Model is not the only facet that has undergone some changes recently. This year, EFQM revised its own strategy, following an internal assessment against the EFQM Model earlier this year that suggested the strategy was not clearly written nor communicated widely enough, both internally and externally. A comprehensive review of the strategy was thus undertaken, taking into account internal feedback but also that of its key members and partners.

The outcome of this exercise was that EFQM’s mission, vision and ambition were re-defined.

Its mission is now to energise leaders who want to learn, share and innovate using the EFQM Excellence Model as a common framework.

The organisation’s vision is of a world where European organisations are recognised as the benchmark for sustainable economic growth; and its ambition is for leading organisations to join EFQM as the European platform for their journey towards sustainable excellence.

It is worth pointing out that EFQM does not wish to focus solely on European organisations; however, its Model is based on European values and EFQM is committed to embracing and promoting these in its network—which it hopes to expand over the next 12 months. EFQM is also looking to increase membership engagement and strengthen its relationship with its partners, as well as to work closely with influencers such as

the European Commission and other international bodies, such as the Global Compact.

Moreover, EFQM is currently focusing on enhancing its brand; and to help achieve this, a number of innovative communication formats are already being used—such as wiki-based collaborative development of learning materials, networking on LinkedIn to specific EFQM groups, and increasing its presence at various professional forums. An annual road trip to members and important local influencers is now a regular part of the calendar, as are EFQM’s consultations with EFQM Valued Professionals—a group of individuals who help the body to promote the model.

EFQM is also producing regular benchmarking reports (such as those it has recently published on how various organisations measure customer perception and people perception). There are plans in place to promote and proactively organise more ‘Communities of Practice’, which unite members into small working groups to share learning on topics such as ‘Applying Lean Principles’ or ‘Innovation’. Promoting industry groupings such as postal, education or the telecoms sector is also on the agenda.

EFQM is gathering momentum with every month that goes by; and having such prestigious names as Areva, Robert Bosch, BMW, Nokia and Rolls Royce on its 500-strong list of members really does speak for itself. www.efqm.org

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Outsourcing your non-core processes to the experts can save your business time and money, freeing up your resources to focus on what you do best. Becky Done talks to Danila Meirlaen, VP for Business Process Outsourcing, HP Enterprise Services EMEA, to find out what’s involved

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n times gone by, the popular perception of business process outsourcing was that its primary goal was to cut costs. But as globalisation continues apace and technology evolves, it is becoming evident that business process outsourcing can offer far more than a boost to the bottom line.

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Cost cutting undoubtedly remains an important part of the equation, but it is increasingly occurring as a natural outcome of the changes being made, rather than being the end goal. “I think initially the industry was very focused on cost savings,” says Danila Meirlaen, VP for Business Process Outsourcing, HP Enterprise Services EMEA. “And the discussion is obviously still around how much you can save; but for the client, business process outsourcing is now far more about how you can impact their end-to-end services, how you can impact their client satisfaction and how you can help them improve their client loyalty. The focus is not right away on the bottom line figure, it’s far more the end-to-end picture.

“I guess as a population we have become far smarter as well,” she continues. “Clients are becoming more open to the fact that they don’t have to own it all—they don’t have to own the technology and the infrastructure and the people.

It’s a journey that we go on with the client.”

So what does that journey encompass?

“Obviously we attempt to deliver cost savings,” says Meirlaen. “That is, our clients avoiding having to come up with upfront investment. We have plenty of clients whose non-core processes we have taken over where they avoid having to make any investment from a technology or platform point of view. Second, it is also our goal to help

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them grow their revenue—a welcome thing in today’s economy. And the third part of the puzzle is customer intimacy—so, not only trying to retain but also gain and increase customer loyalty.”

But inviting another company to come in and manage areas of your organisation is a bold step, one that naturally carries a degree of risk—get it wrong, and the damage to your business could be catastrophic. The business process outsourcing concept therefore understandably attracts some fears. “The most common fear when we start talking to our clients is their assumption that they could lose control, which is obviously not the case,” says Meirlaen. “Under no circumstance would we ever want to question or challenge our customers’ intelligence. I always tell them: ‘you know your business far better than we do and than we ever will.’ However, what we do take pride in is that we have end-to-end, industry-specific solutions that can meet the needs of large volume and complex transaction-driven organisations, and as a result of that we can combine our domain specific experience with the client’s experience and know-how.

Operations

“But it is very much a hand-in-hand operation,” she continues. “It’s not like we take the processes and it’s a done deal—no, because their business evolves and their processes change. So it’s very much a day-to-day relationship with the client where we have different people talking to each other on a daily basis to ensure that we stay abreast of any changes—whether legal, regulatory...they can be very different in nature, obviously.”

For organisations in certain industries, outsourcing risk management is an effective way of ensuring they are operating at the optimum level of security and compliance, among other things. “If we start to look here in Europe and the financial services invdustry, there’s obviously a lot of pressure on those organisations as a result of what has happened [that is, the global economic crisis],” suggests Meirlaen. “So our innovation and our ability to offer a secure environment and regulatory operations is key. Our risk management is key. The regulatory demands are extremely complex if you look at, for example, the back office operation of a bank out of different parts of the world—but we’ve got that economy of scale.”

Economies of scale are clearly what come with being an organisation the size of HP with a global reach to match; and the company is able to offer its clients a wide choice of locations for outsourced operations. “We have the ability to move work to a

location where we can provide the services at a lower cost—Poland for example, where we have a large site,” explains Meirlaen. “We have other clients where we provide services from Kuala Lumpur or Shanghai—there are different locations, obviously, because of the language requirements.”

For clients who feel more comfortable if their operations are kept nearby, HP may choose a closer site before working with the client to move them further afield. “Sometimes it’s a journey we need to take them on,” she says. “We will suggest a shore near to the client in Europe and then take it from there.”

HP’s approach to business process outsourcing tends to suit large-volume, transaction-driven organisations, simply because of the expertise and experience that can be applied to the outsourcing process—HP operates in 16 countries and has more than 300 clients around the world. “It allows us to combine our domain-specific experience with our global multilingual scale and our reach,” Meirlaen says.

And according to Meirlaen, such experience is worth its weight in gold. “We have renewed contracts with clients that we have been in business with for a longer time than some of our competition have been in business process outsourcing,” she reveals. “That says it all, doesn’t it?” www.hp.com

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Trading electronically makes great strategic sense for buyers and suppliers alike; but technical complexity can be a barrier to realising the benefits of enhanced supply chain visibility, as David Grosvenor explains

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he commercial advantages of gaining greater control over the supply chain are widely recognised: increased accuracy, improved customer service, lower inventory holdings and reduced costs, to name but a few. These are attained by having clear and instant visibility of all transactional activities between trading partners, something that can be achieved using electronic data interchange (EDI) technology.

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The problem is that EDI is notoriously difficult, expensive and time-consuming for in-house IT staff, with a vast array of different technologies presently in use for moving data about and with trading partners frequently making changes to their requirements. Multiple connectivity protocols such as AS2, FTP and SFTP, as well as ‘legacy’ protocols such as X25 and X400 create complexity and keeping up with this great variety of formats is a daunting prospect for any organisation.

Complexity exists, too in selecting from the plethora of EDI VANs or web-based portals available, and the multiplicity of data formats that are commonly used only serve to confound— standards such as Tradacoms, EDIFACT, EANCOM, XML, along with all the proprietary formats.

What’s more, these formats vary by customer and change occurs with irritating regularity.

Even if a given customer uses a well-established standard, such as Tradacoms or EANCOM, these may well be interpreted or implemented in slightly different ways, which all adds to the anguish of the IT department. Add to this the rate at which VANs are acquired/retired, connectivity preferences change (many retailers in the US, UK and Europe are moving from VANs to AS2), new document types are introduced (ASNs, proof of delivery), and even minor tweaks made to documents, such as adding a new mandatory field, and the challenges presented on an ongoing basis make maintaining links with customers or suppliers a hardship.

Companies experiencing rapid organic growth, high brand success, expansion into new territories or major new customer wins also put pressure on the B2B infrastructure. But some of the greatest challenges to successful supply chain integration come from the incessant roll-out of new ERP systems with the commensurate disruption this causes to B2B systems.

Managing all of this variety and change is expensive and time-consuming for the IT function and can hardly be described as value-added work.

Outsourcing to a B2B service provider overcomes many of the technical constraints to extending EDI capability to a wider supply base or a growing customer portfolio. Leading retailer Sainsbury’s recently consolidated electronic trading with 4,000 suppliers onto an outsourced B2B platform and building products company Jewson Ltd moved to an internet-based B2B solution, delivered on

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Supply chain

a SaaS basis, to transmit orders electronically to its suppliers. However, there are important considerations to moving your electronic trading to a Software as a Service (SaaS) model.

purely on a transactional basis as a ‘pipe’ between a company and its trading partners. The ‘pipe’ may be very secure, fast and must obviously handle the transformation between data formats, but

“Some of the greatest challenges to successful supply chain integration come from the incessant roll‐out of new ERP systems” Firstly, a secure, reliable infrastructure has to be the foundation for mission-critical B2B processes.

The infrastructure required must include: • Guaranteed continuity of utilities and physical infrastructure (electricity, buildings, secure access etc) • Fully redundant hardware, software and networking components that span the full critical lifecycle of the data involved; in other words, it’s no use the core software application being up and running if network access to the data is unavailable • An alternative disaster recovery (DR) site that is regularly tested with full fall-over simulation and with all of the necessary switch-over processes documented and associated staff available 24x7x365 Secondly, many B2B providers take on responsibility for running the technical platform (hardware and software) and have teams of people that perform routine tasks as requested by the client.

But a genuinely outsourced B2B service is one where the vendor is able to take full responsibility for the B2B project, and that involves: • Project management and on-boarding of all trading partners to the network • An understanding of the client’s business processes that are supported by the B2B programme • An understanding of the market in which the client is operating and of the relationships the client has with its major players • An organisational structure and the supporting processes designed to provide customer support rather than product-focused support However, the single greatest area of differentiation among B2B outsourcing providers is the ability to apply intelligence to the transmitted data in order to create true ‘visibility’. Real-time visibility into supply chain events enables rapid and improved decision-making by individuals in many different roles across an organisation—IT, supply chain and logistics, manufacturing, sales and finance. Most vendors of B2B outsourcing solutions operate

simply by acting as a ‘dumb’ delivery mechanism, these systems fail to provide anything beyond the rudimentary exchange of messages.

Vendors that provide an ‘intelligent’ B2B solution—where each message is opened and the data stored as an integral part of the transactional process—can provide customers with a wealth of information, analysis and functionality based on the content of all messages carried. This ‘intelligence’ provides the potential for rich rewards through offering complete real-time visibility.

Visibility enables customers to realise significant value from: increased confidence in supplier performance leading to safety stock reductions; better visibility into downstream demand leading to optimised manufacturing and reduced raw material safety stock; and real-time awareness of changes in demand or supply, enabling remedial action that prevents a drop in customer service.

Collaborating with trading partners using an ‘intelligent’ B2B network creates a central repository for transactional information—gone are the disparate silos of mismatched information scattered across the supplier base. Consolidating trading data onto one managed database presents a clear and accurate view of the supply chain and provides a consistent set of data that can be shared with trading partners.

With one view of performance, based on accurate, impartial information from all business partners on the network, buyers and suppliers can work together to improve overall supply chain performance.

Building confidence in supplier performance allows inventory, in the form of safety stock, to be removed from the supply chain, freeing up vital cash to the business, making the business fitter and leaner, and placing it in a stronger position to compete.

EDI may be complex, but there is a simple solution.

David Grosvenor is managing director at Wesupply www.wesupply.com

October 10 www.bus-ex.com

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A feel-go G

reenleaf Global is a London-based ethical investment company that pledges to only invest in projects with longterm potential that are economically, environmentally and socially sustainable. The company’s main project is a plot of land in Togo, West Africa, that is currently being developed into a plantation of jatropha for eventual use in biofuels.

Greenleaf says that its projects are intended to make the world a better place; but when the ultimate aim is to make money, this can be a difficult balance to strike. “We only get involved with projects that are sustainable and ethically sound, because we believe that’s what the investor is actually looking for now,” explains co-founder Lawrie Smith. “People almost want a feel-good investment.”

Ten years ago, feel-good investments might have been viewed as idealistic, not grounded in reality or likely to make much of a return; but the growing number of ‘green’ investment funds (many of which are offered by mainstream providers) is proving that this is no longer the case. “The vast majority of our clients invest because they want to earn money,” acknowledges Smith, “but what they do like is that it’s quite exciting, new and it’s a feel-good investment— the money is going to help someone else as well.”

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The priority of most privat return on their outlay—wit second. But the two do no as Becky Done finds out fr ethical investment compan

Sustainability

ood

estment

te investors is to see a healthy th ethical considerations coming ot have to be mutually exclusive, rom Lawrie Smith, co-founder of ny Greenleaf Global

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Sustainability

“We only get involved with projects that are sustainable and ethically sound, because we believe that’s what the investor is actually looking for” Unlike more traditional investment models, the fine details really matter when investors are partly motivated by ethics. When Greenleaf was proposing to develop land, for example, the foodversus-fuel debate had to be taken into account, explains Smith. “Take our biofuel plantation. You shouldn’t be growing fuel crops on land where food can be grown; and you shouldn’t be using crops that could be used for foodstuff as a fuel.”

This, according to Smith, is why jatropha ticks the boxes that other crops don’t— it’s toxic, inedible and it grows on marginal land i.e. land that wouldn’t otherwise be used for food production because it isn’t sufficiently high-quality.

Choosing the right site to develop was an indepth process, also driven by detail. “We visited Togo several times and were shown several plots of land that were not suitable for various reasons—one being that the land was too good for fuel crops to be grown on,” explains Smith.

“It all comes back to the due diligence process and ensuring that from day one, things are done in a correct, ethical and sustainable manner— and the best way to do that was for us to get an environmental and social impact assessment completed as soon as possible.”

Africa can be a challenging place for foreign companies to do business, but Greenleaf found Togo keen to facilitate investment. “We were introduced by a contact of ours to the chairman of the free trade zone in Togo,” says Smith.

Free trade zones are government incentives to encourage foreign investment through measures such as minimal taxes, with trade barriers and other bureaucratic requirements either minimised or lifted completely. “After several visits there and meeting several ministers, we were convinced that they were encouraging our investment and that they wanted to do business.”

The project makes business sense, of course.

The site sits in an area of prime climatic conditions for jatropha, and Greenleaf is also able to employ between 300 to 400 local people in a region that is desperately in need of local employment.

“And because it is quite a small country,” says Smith, “we’ve got very good access to the higher echelons of government, so we feel more comfortable [doing business there].”

For Smith, maintaining an ethical bias throughout the project has been a case of striking the right balance. “For the sacrifice of maybe half a per cent or one per cent in your return, you can do things in an ethical way,” he asserts. “For example, we have an irrigation system on site which is basically provided by boreholes. It’s our intention to go to the local communities who don’t have access to water and drill a borehole for them.

Yes, it costs us a bit of time and a small amount of fuel; but we’ve got the machinery anyway.”

The jatropha project is currently a 2,300 hectare plantation; but there is another 12,000 hectares around the current site that Greenleaf could potentially expand onto. “But it’s very much a case of starting off in a small contained manner and getting that running efficiently before growing and scaling up,” says Smith.

Growth for Greenleaf is likely to come from other projects as well—for example, it is also working on an anaerobic digestion plant in Devon, UK. Anaerobic digestion is one technology that’s supported by a government-backed financial incentive called the feed-in tariff—a scheme which pays nine pence for every kilowatt hour of electricity produced by anaerobic digestion, with the electricity being sold on to the power companies. “It’s really a case of looking to see where the financial incentives are and where the support is,” says Smith. Given the feed-in tariff is guaranteed for 20 years and index-linked, the technology is proving attractive to prospective investors because it more or less represents guaranteed income.

Looking forward, Greenleaf hopes to grow its portfolio of projects; but for the moment, it is concentrating on gaining investment for those it is currently developing. “This is a different way of investing and gaining the return—it’s different to the stock market or to an ISA,” admits Smith. “It’s no worse or better, or particularly complicated, but it is different. People are often rightly cautious of something that’s structured slightly differently— and with green projects, you can get sceptics.

So for us the focus is very much on explaining about the government support and how we gain our return in the long-term,” he concludes. www. greenleaf-global.com

October 10 www.bus-ex.com

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An African odysse

Cluff Gold brought two gold mines production during 2008 and is now to develop a third, much larger pr Chairman Algy Cluff talks to Gay about the rocky road to success

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s to w poised rospect.

Sutton

Cluff Gold

W

hen entrepreneur Algy Cluff migrated from the oil industry to gold mining in 1980, the price of gold was bumping along the bottom, the majority of Africa had yet to be discovered as a global mining destination and all the major mining corporations were exclusively locked into South Africa—unwelcome across the rest of Africa for their association with apartheid. And knowing Africa well, it seemed an enticing prospect. “We could have had the whole of Africa at that time, because there was very little competition,” Cluff comments.

“But that situation changed very quickly.”

Switching from oil to gold mining may have appeared a risky move, particularly as financing was hard to come by and Cluff’s first venture into exploration was in the newly independent Zimbabwe.

However, it has proved both intuitively and intellectually sound, as well as highly productive.

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Cluff Gold

SENET SENET have established themselves as one of the most dynamic project management and engineering companies in Africa today, continuing to expand through a forward looking policy and diversification of their already widespread range of activities, servicing a variety of clients.

SENET

have

extensive

project,

study

and

implementation experience in remote countries throughout Africa, Asia, Central and South America and

have

grown

to

understand

cross

border

logistics, freighting and construction requirements in countries with limited infrastructure.

SENET are committed to a policy of exceptional service and engineering excellence with a strong emphasis on quality, safety and environmental aspects.

“The Baomahun Gold Project in Sierra Leone is our flagship project, and we’ve proved up to two and a half million ounces of resource so far” Cluff’s first African venture was Cluff Resources, an early precursor to his current company, Cluff Gold. As with all his business ventures, it was the excitement of discovering new resources and the challenge of financing and developing them that drove his efforts. And in many ways, this first venture paved the way for the rapidly expanding African mining industry we have today.

Zimbabwe was Cluff Resources’ first project.

“We were the first to invest in Zimbabwe after its independence,” Cluff explains. “We found some excellent unemployed geologists because everyone had pulled out of the country, and the Rhodesian Geological Department records were in extremely good shape. So much of our initial exploration was done in the library and not on the ground.”

This quickly resulted in the acquisition of three productive interests in the newly formed nation.

A fourth mine quickly followed—the Ayanafuri mine in Ghana. And by 1995 the company was producing a highly respectable 150,000 ounces of gold per annum. “Then our nemesis was that we made the biggest gold discovery since the Second World War in Africa—what is now called

the Geita mine in Tanzania.”

Geita could have been the discovery of a lifetime, but it ended up bringing about the demise of the company. Attracted by the yet unquantified gold find, Ashanti Goldfields made a bid for the company. “We had a shareholder in Hong Kong with a 29 per cent shareholding in the company.

They lost their nerve and sold out,” Cluff says. “And without their support we couldn’t really fight off the bid.” Ashanti Goldfields acquired Cluff Resources in 1996, and went on to exploit the Geita find.

Undeterred, Cluff turned his attention to forming a new company that very same year: Cluff Mining. This business then become Ridge Mining and was finally acquired by Aquarius Platinum in July last year.

It was in November 2003, however, that Cluff formally created his current business, Cluff Gold. “We are focusing our efforts purely in West Africa—a favoured destination for the mining industry. Not only does it have the geology, but it also has excellent mining investment codes and tax regimes, rapidly improving infrastructure and accessibility, and governments that not only need foreign investment, but more importantly, want

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it,” he explains. “They can put together a skilled workforce, and are operating within the framework of English, French or Spanish law. And that’s not the case in China or Kurdistan.”

Cluff Gold currently employs some 600 staff. And while its chief operating officer is a New Zealander, everyone else—geologists, engineers, managers and workforce—are all African. And Cluff has nothing but good to say of the quality of the local workforce. “There are some outstanding Africans leaving universities now, trained in a whole range of disciplines including geology and engineering.

And we’re seeing a new class of entrepreneurs emerge too—they’re tough and resilient.”

The company brought two gold mines to full production in 2008, both of them using open pit mining and heap leach processing methods. The first, the Angovia project, is located at Mount Yaoure in Cote d’Ivoire, and began producing gold in March 2008.

Although previously mined, the Angovia project has measured and indicated resources equating to 195,000 ounces of gold in the oxide form and a further 260,000 ounces of gold in the sulphide form, with an additional 61,000 ounces of gold in inferred resources in both forms combined.

Benefiting from a well developed infrastructure, the site also draws on a hydroelectric dam some six kilometres away for its power.

The second producing mine is Kalsaka, located in Burkina Faso. With significantly larger measured and indicated resource equating to 640,000 ounces of gold, and a further 160,000 ounces in inferred resources, the mine began pouring gold in November 2008, and is projected to achieve annualised gold production in the region of 70,000 ounces.

Both of these operations currently produce gold purely from gold oxide. “However, we want to extend the life of those mines, and we believe there are much larger sulphide resources below the oxide,” Cluff explains. “We are therefore exploring to determine whether that’s the case or not.”

Exploration at the two sites is an ongoing process.

The majority of Cluff Gold’s effort and resources, however, are being directed to a relatively new and promising discovery in Sierra Leone. “The Baomahun Gold Project in Sierra Leone is our flagship project, and we’ve proved up to two and a half million ounces of resource so far.”

During 2009, contractors completed some 7,000

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Cluff Gold

Boart Longyear With over 120 years of drilling experience, the Boart

Longyear

Drilling

Services

business

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equipped to provide all types of drilling throughout West Africa and in 40 countries globally. Always leading the way with focus on safety, training and innovation, Boart Longyear teams are constantly developing

tomorrow’s

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metres of core drilling; however, with only 25 per cent of the mineralised area drilled, exploration of the site continues. In parallel with this, feasibility studies are in progress. Once documentation is completed next year, Cluff will begin raising the

US$200 million funding required to bring the mine into production. “We could be in production by the first quarter of 2012,” he says.

Baomahun will be a more sophisticated operation than either Angovia or Kalsaka, being a combination of open pit and underground mine. Once in operation, the company’s workforce is likely to double, and the mine is projected to produce some 160,000 ounces of gold a year. “This would result in us producing over 250,000 ounces of gold a year—which would make us quite a large company.”

With two producing mines and one under development, Cluff is cautious about over stretching and growing too fast. “We’re not looking for new prospects outside the countries we’re currently operating in. We want to build up our cash flow,” he says, “and continue exploration on our current sites to extend our resources and the life of our current mines.” www.cluffgold.com

October 10 www.bus-ex.com

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O

ne of Sweden’s oldest mining operations lies 65 kilometres south of Örebro, in sparsely populated forest land. For 152 years, Zinkgruvan has extracted zinc, lead and silver from this central Swedish location.

These days, the business is 100 per cent owned by the Canadian company Lundin Mining, which controls mining operations in a number of European countries as well as a partnership in the Democratic Republic of Congo.

Although Zinkgruvan has the distinction of being one of the largest underground base metal mines in Sweden, by world standards, it’s not particularly significant. But last year, its 300-strong workforce produced 71,000 tonnes of zinc metal and another 36,000 tonnes of lead metal (both as equivalent in concentrate), plus lesser amounts of silver, collectively worth over $110 million—hence making Zinkgruvan a major player in the supply of two important metals.

From around the 10th century BC, long before it was ever isolated as a separate element, zinc was important in the production of brass. These days, its greatest use is in electroplated corrosionresistant coatings, although there are countless alternative niche uses, from batteries to anti-dandruff shampoo.

One of the two shafts descends 900 metres and a series of ramps and drifts can take men and machinery down to 1,125 metres. The mining process is to drill and blast the rock loose and give it some degree of reduction underground before trucking it in a 20-tonne skip to the shaft, which is presently the only way in which men, waste and materials can get in or out.

“The concentrate process is quite standard,” explains managing director Sam Rasmussen. “We mine the zinc, lead and silver bearing ore and then put it through a process of milling, flotation and filtration to arrive at two damp concentrates, zinc and lead, which is what we sell to our smelter customers. The plant is essentially still the same as was installed in 1976, when operations were modernised. But the equipment is of high quality and is regularly maintained to keep it in top working order.”

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Zinkgruvan Mine

AÂ operation The Zinkgruvan Mine in Sweden carries out its operations with sensitivity to the surrounding area; and the workforce has responded with dedication, loyalty and a commitment to productivity

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Zinkgruvan Mine

SVEBRA Lightweight Piping SVEBRA Lightweight Piping is a manufacturer of quick coupling pipes and pipe fittings that meets high standards in operational reliability and costefficiency. We supply pipes, pipe fittings and couplings for businesses all over the world. Reliable delivery service is our motto. By working closely with selected material suppliers and through our long professional experience we ensure fast and dependable delivery for our customers.

30 years, geologists at Zinkgruvan have been aware of the presence of copper. The odd nugget or even veinlette was often noted but routinely ignored, not only due to its irregularity but also because the focus was well and truly on zinc and lead. Stage one—possibility.

However, 10 years ago, geologists started joining up the dots and soon, a picture of copper bearing lodes began to emerge—probability.

Finally, a more intense programme totalling 100 test holes proved the presence of copper in sufficient quantities to warrant $40 million being

“We mine the zinc, lead and silver bearing ore and then put it through a process of milling, flotation and filtration to arrive at two damp concentrates, zinc and lead” As with all mining operations, waste is a matter of reality but Sweden’s long history of mining both accepts the inevitability of tailings ponds, for example, while imposing strict controls over their management. “We don’t see these as impositions,” says Rasmussen. “The company is happy to shoulder its responsibilities. The new plant, for example, has been designed with noise and dust suppression measures to minimise impact on the nearby villages.”

This is not altruism but sound commercial sense.

Rasmussen—a relative newcomer to Zinkgruvan— is quick to give credit to the workforce, many of whom are fifth generation workers at the plant and residents of the village. “There is an amazing work ethic here and tremendous loyalty to the company.

It’s their skill and dedication which keeps the plant running as productively as it does and they deserve that we act as responsibly as we do.”

The results of the partnership can be seen clearly in the balance sheet. Despite lower quality ore, an operational bottleneck centring on the single hoist shaft and 30-year-old technology in the processing plant, operating costs at Zinkgruvan are in the bottom quartile, as measured worldwide by zinc and lead producers. In fact, a stroke of serendipity is making the already good prospects at Zinkgruvan a whole lot rosier.

When exploring potential veins, geologists are required to go through three phases of proof: possibility, probability and proven resources. For

raised and invested in a completely new and dedicated extraction and concentration plant.

“Estimates indicate that there is about seven to 10 years worth of ore,” says Rasmussen, “which should generate about 7,000 tonnes of copper metal (equivalent in concentrate) per year.”

To support the local economy as much as practical, Zinkgruvan receives many of the services and some of the equipment from regional businesses. This is a welcome boost and another example of the long-term commitment the mining operation provides.

While having a fourth income stream is highly desirable in its own right, the real beauty of the find is how it will impact on the original zinc and lead operations. A 5.5 kilometre long daylight ramp is being constructed in conjunction with the copper project; so, for the first time in the mine’s history, men and machinery will get underground by trucks down a gentle gradient rather than vertically in a cage.

“The significance of this is enormous,” says Rasmussen. “When the ramp project is complete in December 2010, at a stroke we can dedicate the shaft nearly completely to ore and increase our hoisting capacity to include the additional copper ore. At the same time, overheads will be spread wider, thereby lowering our overall operating costs.”

Good news then for investors and for the workforce, who will no doubt be keen to continue demonstrating their loyalty for generations to come. www.lundinmining.com/s/Zinkgruvan.asp

October 10 www.bus-ex.com

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India’s industries continue to march along; and Jeff Daniel learns about one of the companies supporting this expansion

I

n 1999, two industrial giants joined forces to create a truly enormous industrial giant that had, at the time, over 120,000 employees in just about every corner of the globe.

Go back 100 to 200 years and you find products as diverse as diving helmets and rubber tyres among its roots. Along the acquisition path, the two constituent companies of Siebe and BTR collected subsidiaries involved with just about every conceivable aspect of industry. However, a great emphasis was always placed on instrumentation and control which today have been marshalled into Invensys Operations Management—one of the three divisions of the modern-day business. In the financial year 2009 to 2010, Invensys Operations Management reported sales of approximately $1.5 billion, or about 45 per cent of Invensys’s total revenue.

These days, Invensys is a much slimmer version of its previous self; yet a list of its credits cannot fail to impress. On a global basis Invensys helps generate 20 per cent of the world’s electricity and 36 per cent of the world’s nuclear power. It helps produce 70 per cent of the world’s liquefied natural gas and refine 17 per cent of the world’s crude oil. It serves 23 of the top 25 petroleum companies; 47 of the top 50 chemical companies; and 19 of the top 20 pharmaceutical manufacturers.

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And one of the most important areas of operation is centred in India, where managing director Vijay Srinivasan oversees a 600 strong workforce serving the burgeoning economies of India and the rest of Asia—including its main rival, China.

“Traditional automation systems,” he argues, “were designed to control plant efficiency based on highly stable business variables that only changed over long periods of time. Today’s business variables—energy for example—are fluid, often changing every hour or even minute,

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obviously having an impact on operating costs and bottom-line profits. With the emergence of realtime business variables, traditional automation and control systems are no longer up to the task and many businesses are finding it difficult to meet their production and profitability goals.”

To fill this vacuum, Invensys Operations Management is marketing a new approach to help clients achieve operations excellence in real time.

By developing and delivering real-time control solutions that address each client’s most pressing

Invensys

production dilemma at plant and business level, Invensys believes it can help extract efficiency and profitability from all industrial assets.

Additionally, by helping to unify and integrate layers of control, automation and IT systems, Invensys can also help drive continuous productivity improvements from all plant and operations personnel that have a direct impact on the performance of the industrial operation, as well as improve safety, security and the environmental impact of the operation.

and control production value, energy cost and material cost and then optimising them within the constraints of environmental and safety issues.

In previous guises, Invensys Operations Management has had operations in India for more than 30 years, and has steadily grown its business since. It has its headquarters in Pune— 150 kilometres inland from Mumbai. To better service India’s single largest refining hub, Reliance Refinery, a service office exists in Jamnagar. Other

“India’s manufacturing industry, which is driving the country’s GDP growth, is undergoing a major transformation” Invensys products and systems are being used by more than 40,000 clients at more than 225,000 plants and facilities in more than 180 countries.

In total, the company has approximately 9,000 employees and a global network of more than 3,000 partners whose role it is to integrate Invensys services and solutions to help clients collaborate across systems and enterprises in real time. These solutions are designed to extract critical data to make faster, better decisions and synchronise customer operations from the plant floor to the executive offices, aligning production goals with business objectives and improving the sustainability and profitability of their assets.

“India’s manufacturing industry,” says Srinivasan, “which is driving the country’s GDP growth, is undergoing a major transformation. It’s moving away from growth spurred by demand to growth driven by productivity. India’s manufacturing is scaling up and beginning to seek global competitiveness through the wider application of automation and manufacturing IT. Manufacturing companies are under tremendous pressure to deploy their resources efficiently and are forced to look for cost reductions across the supply chain and through the entire plant lifecycle.”

Enabled by its industry and production expertise and accelerated by an open software platform, Invensys Operations Management’s flexible approach blends automation and information technologies, services and expertise into effective solutions that solve problems and optimise the profitability of operations—from single plant devices to entire plants and multi-plant locations.

The company’s blend of patented products and tailored systems is helping clients measure

branches are located in Hyderabad, Chennai, Mumbai and Bangalore.

India today houses Invensys Operations Management’s global engineering centre, building on the country’s international reputation for IT expertise.

Although economic growth is the primary concern amongst Asian countries, Invensys also contributes much to improving environment standards with solutions for waste reduction, pipeline leak detection, water management, chemical recovery, combustion management, carbon tracking and much more.

Invensys’s internal record demonstrates that it practices what it preaches, making it an ideal partner to help industrial companies develop and execute environment and safety excellence strategies. Invensys’s internal sustainability approach and programme exceeds every one of its five environmental key performance indices (CO2, energy, water, non-hazardous waste and hazardous waste) and in the period 2008 to 2009 claims to be the only company in its peer group to have been recognised and listed by the Dow Jones Sustainability Indexes, the Carbon Disclosure Project, the FTSE4Good, the Global Compact and the Carbon Trust as a leader in sustainability.

Invensys Operations Management realised a 13 per cent reduction in CO2 emissions, a 22 per cent reduction in total waste generation, produced 24 per cent less hazardous waste and used 25 per cent less water, as well as 12 per cent less energy. On the safety front it had a 45 per cent reduction in total recordable case incident rate. All brought about, naturally enough, by using its own Invensys sustainability software in its factories. www.invensys.com

October 10 www.bus-ex.com

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High spee andontrack

One of the largest rail infrastructure projects in the world, the Gautra Project heralds a new era of safe and efficient transport for the resid South Africa. The company behind the project is the Bombela Conces

S

ince the 2004 announcement of South Africa’s victorious World Cup bid, much of the global coverage relating to the Rainbow Nation was on that subject alone. Unbeknown to many, there was another mega project in the planning stages at the same time that also captures the imagination—the Gautrain Rapid Rail Project.

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Bombela Concession Company: Gautrain

ain Rapid Rail dents of Gauteng, ssion Company

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Bombela Concession Company: Gautrain

DSI South Africa DSI South Africa supplied the Bombela Concession with 70,000 Double Corrosion Protection (DCP) rock bolts for the Gautrain project over a period of 30 months. The area’s geology was especially diverse along the 13km underground segment with a predominance of groundwater and sandstone deposits causing unstable ground conditions. It is in these complex engineering environments where DSI’s DCP rock bolt technology is able to meet its match. Deployed throughout the Gautrain tunnel system, these rock bolts and DSI’s patented grouting

system

allowed

for

instant

ground

support, swift installation and safe advancement by construction teams.

Today, Gautrain is recognised as the biggest public private partnership (PPP) project in Africa and is currently one of the largest rail infrastructure projects in the world. Gautrain’s private partners are structured under the Bombela Concession Company, which holds a 20-year concession to design, build, part-finance and operate the Gautrain.

Bombela Concession Company is 66 per cent owned by local partners—Murray & Roberts Ltd, Strategic Partners Group, Absa Bank Ltd and the J&J Group—with the remaining 34 per cent held by international companies Bombardier Transportation UK and Bouygues Travaux Publics SA. Gautrain is one of several projects aimed at meeting transport demands anticipated as a result of economic and population growth. The project is one of the most ambitious undertaken by the Gauteng Provincial Government to date; and is set to connect the major cities of Tshwane, Johannesburg and Ekurhuleni.

The Gautrain system has two major corridors on the 80 kilometre alignment: South-North and West-East. The South-North route starts in the Park Station precinct in central Johannesburg and proceeds north encompassing Rosebank, Sandton Business District and on to Pretoria. The West-East route will take passengers from Sandton Station, via Marlboro, to Rhodesfield Station in Kempton Park. From there it will connect to a station built within the airport terminal complex at OR Tambo International Airport.

The 80 kilometres of rail infrastructure will consist of approximately 15 kilometres of tunnelling between Park and Marlboro Station, 10.5 kilometres of viaduct construction and 50 kilometres of surface earth works. Seventy-five per cent of the tunnelling is being done using the drill and blast technique, with the remainder using an earth-pressurised tunnel boring machine (named ‘Imbokodo’) that will excavate the approximately three kilometre tunnel route from Rosebank towards Park Station. International bridge erection technology has been imported to assemble Gautrain’s viaduct decks.

There will be 10 stations, with three underground stations (Johannesburg, Rosebank and Sandton), three elevated (OR Tambo International Airport, Centurion and Pretoria) and four will be at ground level. As well as the stations themselves, the project will encompass park and ride facilities, bus rapid transport services, and links to other forms of transport including planes, taxis, Metrorail trains and cars. The result is a multifunctional transport system that solves the problem of what is often gridlock in one of South Africa’s most bustling economic regions.

Construction of Gautrain started at the end of September 2006 and will be completed in two phases. The first phase, completed in June of this year, includes the network between OR Tambo International Airport and Sandton, and includes the stations at OR Tambo, Rhodesfield, Marlboro and Sandton, together with the depot and operations control centre located south of Allandale Road in Midrand. Crucially, it opened before the start of the World Cup in order to handle the huge influx of international travellers who descended upon South Africa.

The second phase is scheduled for completion in 2011. It comprises the balance of the NorthSouth rail network and stations linking Sandton to Park Station in Johannesburg and the route from Marlboro, past the depot and on to Pretoria and Hatfield stations.

One of the major discussion points in relation to the implementation of Gautrain is the public private partnership (PPP) model that has been one of the key drivers of the project.

Alongside this is the facilitation of partnerships between broad-based black economic empowerment (BBBEE) groups, and the experienced resourced companies. The Strategic Partners Group (SPG) is

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Bombela Concession Company: Gautrain

“Gautrain is one of several projects aimed at meeting transport demands anticipated as a result of economic and population growth” the founding BEE partner and plays a vital role as a 25 per cent shareholder in the Bombela Concession Company. From the outset, SPG’s commitment has been to demonstrate that it does not intend to be a passive investor but one who seeks meaningful participation in Gautrain. Meaningful partnerships and co-operation between domestic and international stakeholders can be evidenced at every level of the project. The exploration of Bombela’s corporate structure highlights this perfectly.

Bombela’s founding shareholders (Murray & Roberts, SPG, Bombardier and Bouygues) all operate at different levels within the Bombela contractual structure. These Bombela entities consist of the Bombela Operating Company (BOC) which has been established to operate and maintain the Gautrain system. During the construction phase, BOC is responsible for reviewing Gautrain’s design and construction, as well as undertaking a testing and commissioning process while preparing for the operation and maintenance phase. A second operating group is the Bombela Turnkey Contractor which has been established to manage the delivery of the rail systems, major civil infrastructure, and the integration of the electro-mechanical works. Lastly

there is both Bombela Civils Joint Venture and Bombela Electrical and Mechanical who are jointly responsible for the design and implementation of the civil works component of Gautrain, as well as the design and implementation of railway components such as the track work and the signalling work.

The result of these highly integrated operating structures best practices is a transport system that will create great pride for South Africans, as witnessed during the World Cup. Just as the people were justifiably proud of their achievements to host such an event, you can now sense similar enthusiasm for a project that has blended South African expertise and ingenuity with the very latest international technologies.

The benefits of Gautrain have already been numerous. It is estimated that the project has created and sustained approximately 30,000 jobs; and projections for the future make equally good reading.

Gauteng is a region growing rapidly both in terms of population and economy and based on current rates of five per cent growth, some two million job creation opportunities have been forecast between now and 2025. Gautrain is a major catalyst for this and the future looks bright. www.bombela.com

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Olayan Descon

Complete responsibility

Olayan Descon is continuing to expand its industrial construction and maintenance capabilities to support the industrialisation of Saudi Arabia. Muhammad Naveed talks to Gay Sutton about the latest move: to provide end-toend engineering, procurement and construction services

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f your image of Saudi Arabia is of a vast desert nation made rich by oil and relying on the import of every commodity required to make life comfortable, you would be wrong. For the past 40 years a significant portion of the Saudi oil revenue has been ploughed into building a national infrastructure, into providing education, and above all, into building a solid industrial base. Today, Saudi boasts two purpose-built industrial cities that rival anything found elsewhere in the world. Jubail, located on the east coast, is the world’s largest industrial city, importing and exporting goods and materials around the world from its busy port on the shores of the Arabian Gulf. Meanwhile, the city of Yanbu, located on the west coast of Saudi Arabia on the Red Sea, is ideally located to provide access to the Indian Ocean and Mediterranean.

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Olayan Descon

One company providing a wide range of support services for this industrialisation is Olayan Descon, established in 1981 as a joint venture between Olayan Saudi Holding Company and Pakistanbased Descon Engineering Limited. “Descon is one of the largest engineering concerns in the private sector in Pakistan, operating throughout Pakistan and the GCC countries,” explains marketing and business development manager, Muhammad Naveed. “It has huge resources across the areas of mechanical, electrical and instrumentation, and civil engineering. And these are the skill sets which we have brought to Saudi Arabia.”

continues. “When completed, the facility will be capable of handling 63,000 cubic metres of liquid chemicals a year, and will be the first of its kind in Saudi Arabia.” The engineering work, which began in April this year, includes a new jetty, lifting and loading equipment, storage and truck loading facilities, and the interconnections between the jetty and storage. Construction work will begin shortly and is due for completion in 18 months.

Operating in the arid conditions of Saudi does present some interesting challenges. Perhaps the most complex of these is the mobilisation of the workforce and equipment required for projects in

“We take semi-skilled and unskilled people from the local community, and provide instruction at our training centre at Jubail” Originally launched in 1981 as a plant maintenance company in Jubail, Olayan Descon quickly expanded and opened offices and facilities in Jubail’s westcoast counterpart, Yanbu. From this solid foundation at the heart of Saudi’s industrial base, the company then diversified into manufacturing, opening a manufacturing workshop in Jubail capable of supplying much of the equipment needed for its expanding operations, including pressure vessels, heat exchangers, tanks and storage facilities.

Then about 15 years ago the company took the strategic decision to diversify into the industrial construction sector, and followed this up recently expanding that offering to include full LSTK (lump sum turnkey) and EPC (engineering, procurement and construction) services anywhere within the Kingdom of Saudi Arabia.

“Our first EPC is now nearing completion,” Naveed says. “By the time we hand the facilities over to Ma’aden in October this year, we will have constructed a magnesite mineral processing plant at Medina, and a complete mine facility on the Al Gazalah magnesite deposit at Zarghat about 300 kilometres from Medina.” The contract is worth SAR95 million. Construction began about 18 months ago, and during the peak period there were some 2,000 people employed on-site.

“Our second EPC project is currently at the engineering phase, and is for a chemical storage facility at Jubail Commercial Port,” Naveed

isolated desert areas, such as the Zarghat mine.

“We either construct the living quarters on site or lease them—if they’re available locally. We then have to transport all the food and water required by the workforce on a daily basis, and then dispose of the waste in a safe and suitable way—again transporting it out by truck,” Naveed says. “It’s a challenge, but it has become standard practice across Saudi Arabia.”

The company has a pool of some 5,000 highly skilled engineering, construction and manufacturing staff across its two main sites, and deploys them as required to undertake the bulk of the construction work, and to provide plant maintenance services to facilities around the country. “We use sub contractors, but these are largely for specialised services such as non destructive testing and evaluation or to operate hired heavy lifting equipment, or if our resources are already fully utilised,” Naveed explains.

Like many companies operating in Saudi Arabia, Olayan Descon recruits from around the world, sourcing the relevant skills from countries such as Bangladesh, Pakistan, India, Vietnam and Sri Lanka, and occasionally from the more expensive work pools of Europe. “We then take responsibility to mobilise the new staff efficiently and legally under the licence permitted by the government of Saudi Arabia,” he says.

The company has an independent training department which manages the training needs of the business and continually updates the

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knowledge base. Junior engineers, for example, are appointed to jobs that will expand and build upon their professional knowledge and experience, and they are moved from job to job in a planned manner to provide comprehensive training. “And this is an ongoing process.”

The company is also committed to training and employing Saudi nationals where it can. “And this is a huge responsibility. We take semi-skilled and unskilled people from the local community, and provide instruction at our training centre at Jubail,” Naveed explains. “They then work on our projects as assistants, developing their skills in a whole range of areas such as fabrication, instrumentation, electrical, health and safety, and environment.”

Continuous improvement plays a large part in the company’s development, and the processes by which this is managed are driven by the experience and standard procedures of parent company Descon. The Saudi company benchmarks its performance annually, and continuously works to improve its performance by refining and developing new and more efficient procedures and processes.

Once proven, these then become part of the standard management manual.

Development and growth continues to be high on the corporate agenda, and the company sees many opportunities ahead within the industrial sector in Saudi Arabia. “In each area where we see opportunities, we are enhancing our resources accordingly, and bringing the knowledge base into the company. And alongside this,” Naveed concludes, “we are looking to develop a new kind of vision within the Kingdom of Saudi Arabia, to help us grow our employees.” www.olayandescon.com

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Oil and troubledwat 58

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OPII

The founder and chairman of the Hashoo Group Sadruddin Hashwani speaks to John O’Hanlon about the purchase of Shell’s LPG marketing assets in Pakistan and the continuing growth of Orient Petroleum International Inc (OPII)

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n 2009, we reported that the focus of Orient Petroleum International Inc (OPII) had shifted from Pakistan, where resources were being developed satisfactorily, to the international arena. This is still very much the company’s long-term strategy, as founder and chairman of the Hashoo Group Sadruddin Hashwani affirms: “We are committed to international expansion wherever we see a good opportunity, but of course our attention is really back on Pakistan in the light of the terrible natural calamity that has hit us in the form of flooding that is affecting every part of the country, and the need to supplement the efforts to increase energy self efficiency.”

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OPII

Sprint Oil Listening to OPI’s needs, and positive collaboration between both teams, enabled Sprint to provide the right solutions and deliver an outstanding service quality. Meanwhile, the openness to innovative ideas was key to both companies meeting their objectives in a cost effective manner.

OPII increased its market share in the local LPG market, Hashwani says. “We bought a controlling interest in Shell Gas LPG for $8 million at a time when only a few companies are investing in the country. This shows the commitment of the

“We have natural resources, our people are hard working and level headed, and the country will recover and be prosperous again” Clearly shaken by the loss of life and the destruction wrought on Pakistan’s infrastructure, and speaking as the disaster unfolds with relief agencies and the government struggling to cope and even worse flooding predicted daily, Hashwani retains his faith in Pakistan’s resilience. Nevertheless, he is dismayed by the confusion among the state agencies, reserving praise for the army as the only effective provider of relief in the initial stages.

Successive governments, he says, have failed to build dams that might have mitigated the disaster and avoided water shortages that have occurred over the last 10 years. Still, his faith is unshakeable: “Pakistan is too important a crossing point between east and west, north and south, to be ignored. We have natural resources, our people are hard working and level headed, and the country will recover and be prosperous again,” he believes.

However, despite a sharp decline in the stock market as a reaction to reports of damage to prominent oil refinery and power plants in southern Punjab, and worries that colossal losses to the country’s infrastructure and their impact on the economy could further intensify this bear run, OPII’s operations have so far been relatively unaffected.

“We are continuing to drill and have in fact just completed one well work over and are moving the rig to the next location,” says Hashwani.

In February this year the Pakistani government granted OPII and Zaver Petroleum Corporation Limited (ZPCL), its sister company in Pakistan, an exploration block covering 2,451.47 square kilometres in Balochistan Province. The two companies will be investing $2.5 million over the next three years at this site alone. To date, OPII has drilled 42 wells in Pakistan with an investment of $537 million and produced 58 million barrels of oil and 302 billion cubic feet of gas from different fields in the country.

In June, through sister company OPI Gas,

shareholder to Pakistan.” Before the deal the two companies shared the local LPG market more or less equally; now, with a 68 per cent interest in its former competitor, OPI Gas is the clear market leader. “At present we are producing 7,000 BOE per day; hopefully, we will be producing double that amount by July 2012.”

And the Shell deal may be the precursor of other larger deals, he adds. The Malaysian oil giant Petronas Carigali has an important onshore stake in Pakistan that Hashwani thinks it is ready to divest. “We have worked with Petronas in joint ventures before, and would definitely be interested in buying their assets.”

Pakistan still has a net deficiency in energy resources, though a very small percentage of its mineral wealth has been exploited, or even discovered, he says. “There are two really outstanding issues in our country’s natural resources sector: one of them is water, the other is oil and gas. Older assets such as the Sui gas field in Balochistan are fast depleting, and every day the gap between our production and consumer demand is getting wider. It is certainly going to be a challenge to meet the dayto-day requirements of the country.”

More particularly, Pakistan has a deficit in terms of oil. “We import over 80 per cent of our needs and are not increasing production fast enough to offset our consumption. We are doing our best at OPII to redress this imbalance. During 2002 to 2008, we drilled 30 new wells, something that nobody had ever done in Pakistan in such a short time span. We made seven discoveries and are in the process of bringing them into production.”

Internationally, Hashwani is excited about the potential offered by Kazakhstan and Azerbaijan; however, the greatest immediate potential would appear to be the group’s onshore operations in the US. “The calamity experienced by BP in the

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Gulf of Mexico has really put the brake on offshore development, but the onshore assets we have acquired in Texas won’t be affected by that.

We only have a few at present but we will be looking to exploit more of these opportunities. These days you can get better deals through producing assets rather than exploring, particularly in Texas.

We already have some producing fields in US and we will be looking to buy more.”

OPII is also buying the rights to the latest airborne geophysical exploration technology from the developers. “These days airborne geophysics is the most effective and widespread method of gathering geophysical data, and more importantly it leads to faster oilfield development. We want to use these techniques in Pakistan and central Asia too, to fasttrack our projects there.”

At the end of 2009 Sadruddin Hashwani and his family moved to Dubai, where the headquarters of OPII is now located. Hashwani has denied that there is any political motivation for this move—after all, his oil and gas business is now global, with properties in Texas, central Asia and Africa, as well as in Pakistan where the Hashoo Group started.

The 70 year old entrepreneur is showing no signs of slowing down. Tourism may not be the hottest industry in Pakistan right now, but the confidence he has in the future of his newly built Pearl Continental hotel at Muzaffarabad in the depths of the country’s disputed territory reflects his belief that normality will soon return to Pakistan. www.opii.com

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The hybr

Sometimes success brings problems rather than rewards; but as Alan Swaby learns, the resourceful manager will find ways of solving them

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ecturers on business management courses, looking for interesting new case studies—or novelists, for that matter, wanting an intriguing plotline—could do a lot worse than consider the ups and downs of Metro Cash & Carry. This South African business has everything—a rapid rise in fortune, boardroom fallouts, international takeovers, equally rapid decline and a fight for survival.

Metcash (the name under which the business most commonly trades) was set up in 1969 by Natie Kirsh—one of the country’s most successful entrepreneurs—as the first food cash & carry wholesaler serving the black population of South Africa. Although the retail scene has progressed and become more westernised, in the townships they haven’t completely changed. Now, and very definitely then, the multi-layered retail scene might see goods being sold from a recognisable shop or—just as likely—from the front room of someone’s township home.

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Metcash

Fire Control Systems (PTY) Ltd Fire Control Systems (PTY) Ltd is South Africa’s leading

and

largest

fire

protection

company.

We provide turnkey solutions to the commercial sprinkler, special risks, fire detection and gas suppression markets, as well as servicing and maintenance

of

equipment.

We

are

the

sole

distributor of Tyco’s water-based fire products in South Africa. Metcash is a valuable client and we provide the optimum fire system solutions to their facilities around South Africa.

Premier Foods Premier Foods have been partners with Metro Cash and Carry since 1969. For over four decades, Premier’s iconic South African brands like Iwisa Maize Meal, Snowflake Flour and more recently, Blue Ribbon Bread have been found on Metcash shelves and in households across the country.

Premier have taken each step of this journey with Metcash and are proud to be partners in the next chapter of the story.

In the 1970s Kirsh sold out and moved to the United States, adapting the Metro model into Jetro Cash & Carry, one of the largest private companies in the US, worth more than US$3.5 billion. For another decade Metcash continued to prosper under its new management until a bust up in the 1980s caused a key group of directors to split off and set up Score supermarkets.

Later, Score merged with Metro and continued to grow to the point where it took over Davids—a once successful but then ailing Australian wholesaler— turning it around in just 18 months.

So far, so good; but when the major institutional shareholders in Metro wanted to divest their interest, Metro was first forced into selling Davids (bought for R1 billion, sold for R6 billion, currently worth R36 billion) and then into a management buyout with associated de-listing from the stock exchange in 2004.

“It’s at this point when the company’s fortunes began to decline,” explains Metro’s

recently appointed CEO, Peter Dodson. “Public companies receive credit from suppliers without the need of guarantees; but not so for private concerns. On top of the debt incurred in buying out Standard Bank and Liberty Life, we were then hit with the need to provide guarantees for the goods being traded.”

Despite growing 45 per cent between 2005 and 2008, the situation got worse. A squeeze on cash flow meant payment to suppliers was delayed, which in turn resulted in supplies being suspended, shelves going empty and dissatisfied customers deserting the brand.

In 2009 Dodson almost found the injection of funds he needed when the black group Fabcos was keen to buy. In the end it didn’t happen and the banks were reluctant to invest more into a model they only saw as already having a hard time surviving.

But Dodson did have one more card to play.

Ten years earlier, he had been running ICC, a competitive wholesaler that had hit upon a new business model—the hybrid wholesaler/retailer.

Commercial customers want to buy in bulk, while private individuals are more inclined to buy in ones and twos. The hybrid model caters for both sectors.

“This was going to be a major shift in strategy for Metro,” says Dodson, “but the banks could see the value in investing in a business on the crest of a new commercial wave. We were able to convert the debt into equity and get the money needed to make the necessary changes to our premises.”

Metcash has 140 stores but 90 of them have been identified as being in the wrong place.

Once an industrial park would have been an acceptable location for a wholesaler; but these days, something closer to the High Street is more desirable—even when customers are buying by the pallet. As such, conversion will have to wait until these leases have expired and Metcash can move into more appropriate quarters. However, the latest completion will have been made within five years.

In the meantime, the other 50 are under active conversion, in tranches of 15 at a time and at an initial cost of around R700 million. The stores themselves will look much different—even to other hybrid outlets. Not only will there be a new corporate identity but Metcash is catering for consumer needs, with a bakery and butcher as well as ready-to-eat hot foods and all the usual frozen

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“The banks could see the value in investing in a business on the crest of a new commercial wave” and chilled offerings that need good refrigerated cabinets. On top of all that is a much expanded product range, akin to a conventional supermarket.

But a hybrid store also needs exceedingly sophisticated IT systems, not least because every item on sale has four different prices, depending on the quantity purchased—singles, multiples and even pallet loads. A new business management package from SAP is taking care of that side of things.

Switching from purely wholesale to catering for consumers is going to mean a whole new outlook for the 5,500 employees. Dodson has already restructured the business and 400 lost jobs last year have made it leaner. With new attitudes to learn, as well as new procedures and equipment to master, training is a high priority at the moment.

But Dodson is confident he is onto a winner.

Metro currently turns over R12 billion a year out of a total nationwide spend of R260 billion, of which 40 per cent is classified as wholesale.

In five years’ time, he confidently expects it to have doubled in size and with a good wind, it may well have tripled.

Catering 100 per cent for the black market is a strategy that hasn’t changed in the life of the business. It’s taken Metro to success in neighbouring countries as well as further afield.

Dodson is possibly looking at plans to take the business into Nigeria—a huge, affluent and potentially rewarding venture. But that is another chapter for the business educationalist or novelist. www.metcash.co.za

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Timed

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Landing the World Cup brought some difficult decisions for the So Roads Agency (SANRAL) when planning the Gauteng Freeway Im Project manager Alex van Niekerk outlined the

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rfection

outh African National mprovement Project. ese to John O’Hanlon

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auteng has experienced traffic growth of between five and seven per cent each year over the last decade and in the late 1990s was already congested enough to worry the South African National Roads Agency (SANRAL). After considering a range of third party solutions, it finally decided that the best way to solve the complex problems of traffic management around Johannesburg would be to carry out its own in-house study. “The key issue was financing such a huge capital project,” says project manager Alex van Niekerk. It would not be enough to treat it like a regular road improvement project: the solution had to be future-proof, allowing for and actively encouraging the expected growth of industry and commerce in Gauteng over the next 20 years and further.

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CMC di Ravenna On April 2008 “CMC di Ravenna South Africa Branch” was awarded by South African National Roads Agency to rehabilitate 18 km of freeway in Johannesburg, with a contract value of about 90,000,000 pounds. High volume traffic, difficult logistics and new construction technologies was a real and tough challenge that did not discourage the working team. The road renewal involved about 1,000 local people for activities related to the project. The technical peculiarities are a new concrete pavement technology on ultrathin concrete (thickness 50mm) and a 270m launched bridge over existing highways that had been executed without any interference of existing traffic.

It had to be done in a single project. “We didn’t want to have construction work going on in Gauteng because it impacts people’s lives. We needed a one-time intervention, with sustainable revenue to continue to upgrade the network and not fall behind again.” The entire GFIP scheme comprises 560 kilometres of new or upgraded freeway. The first phase, which will be completed next year, upgrades the ‘core’ network of 185 kilometres, linked to what is currently the largest road tolling project anywhere in the world.

The project was in the planning stage when the World Cup was announced in 2004. A decision had to be taken: “Do we start now or wait till after the World Cup? We knew that if we started as planned we’d be in the middle of a construction project, and we did not want to give the impression that South Africa couldn’t complete a highly visible project!”

It was decided that the project should go ahead but that certain ‘milestones’ should be embedded in the contracts, setting out the condition the road should be in by the time the World Cup started. “It added a lot of pressure,” he admits. “FIFA couldn’t be expected to move its dates to accommodate us, so we had to fast-track the design and tendering process. From sending out the tenders to awarding the contracts took only three months.”

SANRAL was concerned that the construction industry might not be prepared for such a large amount of work to come onto the market at one time. Contractors were required to prequalify, and during that process SANRAL encouraged them to form joint ventures with smaller partners. In December 2007 the bulk of the work, comprising

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120 kilometres of Phase 1, was divided into two bundles, each divided into three work packages.

Each of the six contractors that had prequalified were required to tender for all three work packages in one or other of the bundles. “That way we could be sure of getting competitive tenders on each work package,” explains van Niekerk.

Another challenge foreseen was the provision of temporary concrete barriers to separate traffic from ongoing work. If the contractors had rented them they would have faced a lead time of at least three months, so SANRAL placed a contract with Gauteng manufacturers for the manufacture of 10 kilometres of barriers for each of the six sections.

This saved on the cost of transporting the heavy sections, and ensured that when the contractors were ready to start, they each had the barriers they needed for traffic accommodation. Similarly the permanent precast concrete barriers dividing the carriageways, and all the lighting masts and luminaires for the entire 185 kilometres, were procured by means of separate contracts

by SANRAL and supplied to the contractors.

“I believe it is very important to keep one step ahead,” van Niekerk says.

Normally on a road contract the client appoints the design consultant engineers, who appoint the surveyor and commission the traffic study but to save time SANRAL bulked together as much work as possible, and commissioned these as separate work packages in order for the design consulting engineers to have it at their fingertips when the design process commenced. To ensure design consistency and help achieve the milestones, the work was approached in clusters, with the geometric design, traffic engineering and pavement design leaders from each consulting engineer brought together to thrash out design principles with the appropriate member of the SANRAL project management team. This was a forum for quick decision-making, he says: “It was important to make a decision even if we did not always get it right first time.”

The contracts were awarded in May 2008, and construction started in June, just two years before the World Cup. Progress with the work was steady right up till the end of 2009, with nothing more than the odd redesign or change of plan when, for example, underground services were not in the place they should be. Since the contractors weren’t

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allowed to work on these services from third party service providers, progress would then be delayed by the ability of the service provider to move their utility. Nevertheless the milestones were met.

Then the weather turned nasty. “Between January and May 2010 we had between two and three times the normal rainfall and that posed the biggest challenge to the milestones. Most of the work is weather dependent and you get to a point where the ground is so saturated that even a little bit of rain causes everything to be delayed.”

Van Niekerk takes his hard hat off to the contractors who worked nights and weekends to catch up. His team contributed by rescheduling so that work could go on at different locations and allowing more lane closures in off-peak hours (though the contractual commitment to avoid any lane closure at peak times was never broken).

The contractors had until the end of May, with an emergency buffer of one week after that. The end result was that the milestones were mostly reached on target, some improved upon. “The sites were made clean and neat, the road markings in place, the additional capacity was there, and for the residents of Gauteng it was a traffic holiday. People were reporting anything from 30 to 90 minutes shorter journey times. It is a demonstration of what the job will mean economically, as well as good for the World Cup,” says van Niekerk.

The event was held; Spain took home the cup— end of story? Not quite. “For the duration of the

World Cup we stopped construction for a little over a month, then the contractors returned to do the final part of the Phase 1 work. Most of those contracts will be substantially completed by the end of this year or early 2011.”

The next challenge is to implement the electronic tolling system. Forty-two toll gantries and 15 customer care buildings were incorporated in the civil works, and the $155 million contract for the design and installation of the system was awarded to Electronic Toll Collection Pty Ltd (ETC), a joint venture of the Austrian firm Kapsch and local firm Traffic Management Technology. The system will go live by the middle of next year. ETC was also awarded to contract for the operations of the system, for eight years.

GFIP has given a boost to the South African construction industry, van Niekerk believes. It gave opportunities to young engineers to tackle things they don’t often encounter, like the interchange upgrades and long incremental launch bridges.

“The joint ventures brought in smaller companies that obtained a lot of knowledge and training for their personnel, upgrading their CIDB ratings.”

Some of those companies ended up joining their lead JV partner, he adds. “It reshuffled and grew the industry. The experience will provide us with more competent companies that can tender on future projects, and SANRAL learned a lot from rolling out a complex project like this as well.” www.nra.co.za

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Haw & Inglis Civil Engineering (Pty) Ltd

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ess

Commercial director of Haw & Inglis Civil Engineering Francis Chemaly tells Jane Bordenave how the company has developed over the past 12 months and what the future has in store

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ape Town-based Haw & Inglis is one of South Africa’s foremost civil engineering firms, with 25 years of experience in the field. The company has particular expertise in road and highway construction and has been instrumental in developing the country’s infrastructure.

As reported the last time that Achieving Business Excellence spoke to the company, Haw & Inglis was involved with three major projects linked to the World Cup: a R220 million project to upgrade the Hospital Bend Interchange, one of the main arteries into Cape Town; a R550 million project on the R300 freeway, which links two sections of the city; and a R150 million contract widening the N2 alongside the Lagoon leading into Knysna, close to where the French World Cup soccer team were staying.

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While there were more contracts on offer, the company took the decision to limit their exposure to the World Cup to these three. “We did have the capacity to take on more work, but we decided that it would be better for business if we did not tender for any more,” explains Francis Chemaly, the firm’s commercial director. “Our rationale was that if we had gone all-out for the tournament we would have been at risk of everything stopping at once, leaving us high and dry. Consequently, we decided to look at other infrastructure projects to maintain continuity of work beyond summer 2010.” This managed level of risk, with only 30 to 40 per cent of turnover being dependent on the World Cup, meant that the firm did not experience a massive drop-off in turnover levels or work once the associated construction was completed.

lead to non-investment or poor spending decisions when using money designated for these areas.”

To combat this problem, Haw & Inglis has formed a joint venture with a number of similar-sized construction companies, consulting firms and the provincial government, which put in place a R9 million to R12 million higher education bursary programme. Between 200 and 250 bursaries are awarded each year to people who would not otherwise have been able to access university or technical college, roughly 40 of which are cofinanced by Haw & Inglis. The consortium also mentors the bursary students and offers counsellors to help them through the process, as most come from financially disadvantaged backgrounds. Once they have finished their studies, the companies involved in the programme take the students on as

“We have a system whereby an employee is expected to find his or her replacement if they wish to move up the career ladder themselves” One unforeseen consequence of the World Cup was that much of the South African economy was insulated from the effects of the recession, which the rest of the world had already been feeling for over a year. However, the crisis has now caught up with the country, and businesses are feeling the pinch. “While we did manage our risk carefully in the run-up to the World Cup, no one can escape the effects of the recession completely,” says Chemaly. “The market has started to feel the pain over the past six months and we have seen margins decline significantly. I think it will take in the order of a year to 18 months for things to stabilise and business to return to some level of normality; however, we remain optimistic.”

One of the company’s areas of focus for investment is building South Africa’s talent pool in terms of engineering and technical expertise.

“What we are experiencing with the government’s continued focus on infrastructural spend is high skills shortages in the engineering and built environment fields of knowledge. This situation poses a real risk to industry in the mid to long term as, if the government lacks these skills, there is the danger that it will have difficulty managing the budgets in the respective domains. This could

employees. This helps stop the skills seepage that South Africa has experienced over the years, with many newly trained engineers and other skilled technical workers leaving to work in Europe or the Middle and Far East.

Specific focus has been placed on employees indentified to work in government. They spend some time working and receiving on-the-job training in the private sector in a structured developmental programme, following which they are placed back in government, enabling it to rebuild its technological and professional capacity.

“It is a long term project and a real challenge, but we are confident we will succeed,” says Chemaly.

The firm’s mentoring and rotating promotion schemes remain in place and form the keystone of its ethos. “We believe in a culture of succession and promoting within. We have a system whereby an employee is expected to find his or her replacement if they wish to move up the career ladder themselves.

Those of our staff who are already in top-level management are expected to mentor people who are lower down the chain of command. Additionally, once specific top management reach the age of around 50 to 55, they are encouraged to move aside and allow fresh blood to take on their roles, while

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Haw & Inglis Civil Engineering (Pty) Ltd

still remaining with the company as a mentor and guide. This keeps our management fairly young and makes us a more dynamic company, as well as rewarding our employees for their hard work and committed service.”

Looking to the future, Chemaly sees Haw & Inglis as a more diversified company, but not necessarily a bigger one. “When we look forward, it is hard to make predictions on things like turnover, as it depends on what the South African market does. We are not a company that pursues growth for the sake of growth—as long as we are able to deliver for our clients, ensure that our staff are happy and maintain a competitive position in the market at the size we are now, then there is no need to take on an aggressive growth strategy,” he explains. “In terms of diversification, we are considering the possibility of moving into Africa and, of course, our acquisition of Peak Projects has enabled us to take on more contracts outside of the roads and highways arena.”

With the company having celebrated its 25th anniversary last year, it is not hard to imagine that with its continued strategic approach to management, dedication to its employees and measured approach to all areas of its business, it will still be in good health for another quarter-century—and longer—to come. www.haw-inglis.co.za

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Escalating

gro

South Africa’s construction boom h time for a raft of new elevator and The rise in demand prompted Schindle the established players, to review its a Pankaj Sinha, newly appointed m Andrew Pelis how the company has trans

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Schindler South Africa

owth

has proved a lucrative d escalator companies. er South Africa, one of approach to business. managing director, tells sformed its operations

T

he story of South Africa’s elevator industry over the last three years has been an uplifting tale of booming business. The downside for established companies like Schindler South Africa has been the need to re-evaluate and restructure in order to meet the changing demands of an ever-growing customer base, while also fending off new competition.

Schindler has long been one of the world’s largest elevator and escalator companies. Headquartered in Switzerland, this multinational giant is regarded as market leader for escalators and the number two company for elevators. It has had a presence in South Africa since 1949; and during the bleak years of apartheid, with Otis Lifts, it dominated the local market, with the two businesses claiming roughly a 90 per cent share of the market.

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Schindler South Africa

Machine Moving & Rigging Machine Moving & Rigging was established in 1983 and has teams of qualified, certified personnel.

Before commencement of projects, management prepare method and rigging studies.

Machine Moving & Rigging have a long standing relationship with Schindler Lift (S.A.) (Pty) Ltd and continually work together with them on various projects

throughout

Southern

Africa,

including

installing escalators at OR Tambo International Airport.

“The average life of an elevator is 20 years, so the aftermarket is an important aspect of what we do” As the country became assimilated with the rest of the commercial world, there was a boom economic period of growth. In 2007 Pankaj Sinha relocated from India as head of operations, since when the business has undergone a major transformation.

“We remain a subsidiary of Schindler Switzerland and from our Johannesburg headquarters we cover all of Southern Africa,” he explains. “We no longer have any manufacturing facilities here in South Africa—instead we rely on competency centres that manufacture at a global level and we source from Spain, Switzerland and China.”

Schindler South Africa concentrates on sales, installations and maintenance work—a change in focus that has significantly helped the business to adapt to its changing environment. “The average life of an elevator is 20 years, so the aftermarket is an important aspect of what we do and we also have a large modernisation operation in place to upgrade old systems,” adds Sinha.

Around three years ago, the company entered into a joint venture with Matemeku Group who now own 10 per cent of the business. Matemeku is wholly black-owned and its stake has contributed towards Schindler’s standing as the only elevator company in the country with a BEE Level 4 Rating.

“This certainly gives us an advantage when it comes to bidding on government projects,” admits Sinha, “but it also gives us an emphasis on developing local talent.”

That development comes through a number

of training initiatives, including a very strong apprenticeship programme that currently accommodates 25 trainees, where Sinha says the changing racial mix becomes apparent.

Aside from apprenticeships, he says there is an ongoing training system designed to meet constantly changing safety regulations. “Certainly this is one aspect that we focus heavily on and we aim to achieve zero tolerance; but we also provide technical training that helps to update our people’s skills, while we also focus on keeping our engineers up to date with maintenance issues.”

The company’s commitment to training was further underlined by the launch last March of the Schindler Development Academy in Johannesburg.

The purpose of the centre is multi-functional and it not only grooms the next generation of company leaders but helps employees across the business to learn new skills. Although run in partnership with local company Wow Group, Sinha suggests that by next March Schindler will have invested around R1.5 million in the project, with around 30 per cent of the company’s 550 employees having undertaken some form of training there.

Sinha says that the shift from a manufacturing base has improved product quality and consistency and has allowed Schindler South Africa to concentrate more on customer needs.

Innovation has played its part in that goal and led to the launch of pioneering products such as destination control technology that enables an

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individual to press a destination button in a lobby and receive notification of which elevator to get into to reach that destination.

“This has proven very successful in South Africa,” comments Sinha. “There are lots of prestigious buildings here now that use this system of traffic management. Now that the market has changed, there is much more competition in our industry and the customer has more choice. I think this is a positive development, as it forces companies to ramp-up their level of service. The companies that understand the emerging reality are the ones which will ultimately win. Schindler has transformed itself from an inward-looking business to one that is focused on customer requirements.”

The changes made, he says, have resulted in the business growing in the region of 70 per cent over the past few years.

Certainly the FIFA World Cup presented a number of spin-off opportunities on a number of construction projects; although Sinha feels government spending has now slowed down, with this type of contract accounting for roughly 25 per cent of the company’s business.

“The rest of our work tends to come from the private sector, with commercial opportunities more common than residential,” he states. “We have certainly seen growth in the number of shopping malls and infrastructure projects (like office buildings) that we work on. Today we have market share in the region of 27 per cent.”

The challenge of maintaining that market share and growing it is a mantle handed to Sinha as recently as this July, when he assumed the role of managing director. It is a role he is comfortable with, although he never loses sight of current market activity. “We do not offer the cheapest elevators or escalators but there is a premium for the brand and quality is relevant. We may not compete with local players on prices but Schindler South Africa is today perceived as the best project management company and that is something we have invested lots of time and training into, bringing people with specific project management skills into the company and looking at specific competencies. Our core skills are people management, customer relationships and project management competencies; and we have even invested in our sub-contractors to train them in our technologies, following a performance review.”

Sinha says it is a good time to be involved in the elevator sector, so long as the company is prepared to cope with demand. “The boom has happened in the last three years and some people were caught unawares and did not have the capacity to deliver, whereas we could.

“When I came to South Africa, I had already experienced the construction boom in India and knew that our efforts here needed to focus on planning ahead, something I was used to. Our priorities now are to keep improving our market share (we are the number one construction company right now), to continue to improve our safety track record and to develop the next generation of management.” www.schindler.co.za

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Schindler South Africa

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The

wakin gia Transnet is investing billions of rand in transforming South Africa’s transport infrastructure, as Moira Moses told Ruari McCallion

T

ransport infrastructure can define a country—just think of India’s railways, the high-speed trains of Europe and Japan and the USA’s highways. China is investing heavily in creating the world’s most advanced rail infrastructure; and South Africa is committed to making its rail, port and pipelines network fit for the 21st century.

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Tr a n s n e t : C a p i t a l P r o j e c t s

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Tr a n s n e t : C a p i t a l P r o j e c t s

Platinum Projects Platinum Projects holds a close association with Transnet through successfully completed refurbishment projects on the tipplers, ore reclaimers and shiploaders.

Turnkey service, rapid response and deadline delivery with quality, safety and cost efficiency have reinforced this association. Project management, mechanical, electrical, structural engineering, specialized welding services, cranage, rigging, design and automation are the services currently provided by us to Transnet.

billion or a little over €2 billion. The investment is a key element in Transnet’s turnaround and growth strategy, which was launched in 2004.

“At that time, Transnet was a large conglomerate.

It owned South African Airways, passenger transport operations and many other noncore interests,” Moses explains. “The decision was taken at that time to focus on our core business— there was a pressing need to invest, with a lot of backlog that required attention.

“At the onset of our turnaround strategy we opted to focus on four key areas—human capital development, improving corporate governance,

“We have the responsibility for the development and execution of large and mega-sized projects: effectively, everything over R50 million” South Africa has an established rail network; but it could not be regarded as a world leader. However, this is in the process of change. The organisation that is tasked to implement the growth and regeneration strategy is Transnet Capital Projects, which is part of the South African governmentowned Transnet Ltd. “Transnet is made up of five operating divisions,” says Moira Moses, group executive of Transnet Capital Projects (TCP). “They are: Transnet Freight Rail; Transnet National Port Authority, which owns eight of the country’s major ports; Transnet Port Terminals; Transnet Rail Engineering, which manufactures and maintains rolling stock; and Transnet Pipelines.” TCP is one of two special divisions of the organisation, the other being Transnet Properties.

TCP has three functions, as Moses explains: “First, we undertake all long-range planning for the company. We take a 30-year view on infrastructure requirements and formulate, from that, a five-year plan,” she says. “Second, we have the responsibility for the development and execution of large and mega-sized projects: effectively, everything over R50 million. Last, we are charged with the maintenance of the physical infrastructure, including track and signalling.”

TCP is investing immensely—around R20 billion a year. Even with the decline in value of the rand compared with other major currencies, this is a great deal of money—equivalent to nearly $3

re-engineering the business and strengthening the balance sheet,” she continues. “In order to optimise our business deliverables and to become an efficient and focused bulk freight logistics company, Transnet looked at the four areas that would deliver the most business value. In order to optimise the business and deliver commercial value to the Transnet customer, key commodities were prioritised and the corridor strategy was developed.”

To facilitate the corridor approach, TCP developed a stronger understanding of its key assets and network infrastructure, to enable growth by creating capacity ahead of demand—thus a 30-year view on infrastructure and demand forecasting. The implementation of this structured approach has enabled the company to improve capacity and performance along all of its priority corridors.

“In the West Coast-Cape area, the core commodity is iron ore from the Sishen mines in the Northern Cape. We rail that ore for over 800 kilometres, to Saldanha Bay,” Moses says. “Our first investment programme resulted in a rise in tonnage capacity from 47 million to 60 million tonnes. To enable the growth along this line we created more passing loops and updated the signalling systems.” Port infrastructure was simultaneously updated to cope with the additional traffic. “We extended a stacking yard, updated our existing stacker/reclaimers and ship loaders, and bought new units as well.”

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Tr a n s n e t : C a p i t a l P r o j e c t s

The Gauteng-Cape Town corridor has also benefited. “This is a large export area but there is a lot of business local to Cape Town as well,” Moses continues. “We upgraded the carrying capacity of the container terminal, with a reconfigured layout, new ship-to-shore cranes and rail-mounted gantry cranes—so a pretty comprehensive programme of modernisation.” Port Elizabeth now has a new port facility; and a few miles up the coast, Ngqura now has a deepwater port that caters for the larger new generation vessels. “With all this development, Transnet is now well established to support trade with the growing markets, BRIC countries and other trade

“Transnet is now well established to support trade with the growing markets, BRIC countries and other trade that comes around Africa” that comes around Africa. Our hub terminal facilities allow for trans-shipping and short-route shipping to the east and west coasts of the continent.”

Durban, the busiest port in Africa, has seen a number of projects to improve and extend its capacity and efficiency. Vehicles produced by BMW, MercedesBenz and Ford are transported by rail through the city to the port for export. TCP is currently building a new multi-product pipeline (NMPP) from Durban to Jameson Park near Johannesburg. The new pipeline is scheduled to come on line in 2013 and will cater for the greater Gauteng and surrounding areas’ fuel needs for the next 50 years.

Collectively, Transnet has invested R75 billion over the past five years in infrastructure and rolling stock optimisation and will continue to grow the business in line with its 30 year plan. “We are working closely with our stakeholders to ensure that we regain market share from road haulage— our biggest competitor at this stage,” Moses says.

“We have a strong balance sheet and are steadily improving on our operations and infrastructure capacity. This is good news for Transnet as we continue to focus on our growth strategy.

“We have also improved our safety record and shortened the time taken to deliver our projects,” Moses concludes. It all adds up to a sound foundation for South Africa’s future transport infrastructure. www.transnet.net

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A

cleaner

stat

Tarun Kapoor, m Himachal Pradesh Limited (HPPCL), talk about the socia imperatives o generat

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HPPCL

r

teaffairs of

managing director of h Power Corporation ks to Jayne Flannery l and environmental of sustainable power tion within the state

I

ndia is a power hungry nation with a worrying shortfall between projected energy requirements and current capacity. Large untapped hydro potential exists in the rivers that flow down from the Himalayas to the north of the country. This represents a magnificent natural resource—one that is clean, renewable and not dependent on the vagaries of commodity price cycles.

The mountainous state of Himachal Pradesh is bordered by Jammu and Kashmir to the north, Punjab to the west and south-west, Haryana on the south and China on the east. The highest mountain reaches to almost 7,000 metres and the landscape is indented by countless gorges and river valleys, making it perfect territory for the generation of power through water. The government of Himachal Pradesh estimates that the total hydro power potential of the state is in the region of 21,000 MW—this gives it a key strategic importance to India’s energy security.

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HPPCL

The Himachal Pradesh Power Corporation Limited (HPPCL) was formed in the wake of the 2003 Electricity Act, which was intended to facilitate the additional power generation capacity needed to sustain India’s economic growth.

HPPCL was incorporated in 2006 with a remit to plan, promote and manage the development of all aspects of hydroelectric power in the state on behalf of Himachal Pradesh State Government (GoHP) and Himachal Pradesh State Electricity Board (HPSEB). These are the joint owners of the corporation, with GoHP holding a majority stake of 60 per cent.

“Formerly state-managed boards were in control,

but they were too big and inefficient so a decision was made to unbundle them and restructure the sector, allocating management according to competence, not tradition,” explains managing director Tarun Kapoor. “We are fully governmentowned, but we manage the corporation along very professional lines and aim to be able to compete with any private sector organisation. We have the flexibility to tender for external projects and also to undertake projects in partnership with other private companies.”

HPPCL has been set the ambitious target of achieving 3,000 MW of power generating capacity

by March 2017 and 5,000 MW by the year 2022. So

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HPPCL

ANDRITZ HYDRO ANDRITZ HYDRO is a world leader in the supply of turnkey plants and services for hydropower stations. In addition, rehabilitation and upgrading of existing plants are offered. Further fields of activity are development, design, and manufacture of pumps for selected applications.

ANDRITZ HYDRO promotes hydropower as the most economic form of renewable energy. In close cooperation with the customers, ANDRITZ HYDRO

elaborates

long-lived,

environmentally

friendly concepts maintaining nature, mankind, and technology in perfect harmony. Over 170 years of experience in the hydraulic energy supply business and intensive research and development work form the solid basis of ANDRITZ HYDRO’s capabilities.

far, 20 hydro projects fall within its portfolio, with work ongoing in three—Sawra Kuddu, Kashang and Sainj. It has a loan of US$800 million from the Asian Development Bank for four projects.

However, whilst the state has a clear desire to see more energy produced, the manner in which this is to be achieved has been carefully prescribed, with a strong emphasis on balanced and sustainable initiatives which take a proactive stance towards the local developmental needs of families displaced or affected by the projects.

“At present, our main focus is on hydro-electric power generation, but we are keenly aware of the environmental impact of generating energy in this way,” Kapoor states. “Clean energy is not just about the method of generation, it is also about managing long-term social and economic change. We have a policy to always reinstate any environmental damage, but we also want to understand and alleviate the wider social impact of hydro-electric projects.

“The number of people we have to displace is small and there will be compensation, but the indirect effects are much larger,” he continues.

“For example, many people are dependent on local forests for fuel or fodder for their cattle, even though they don’t own the land. Major construction work, changes in land usage and a whole new infrastructure means massive lifestyle

changes for rural communities.”

To address these issues HPPCL has an elaborate Relief & Rehabilitation policy, which goes far beyond monetary compensation. “We want to build community assets and ensure that education improves so that young people can find work in the future,” says Kapoor. “We fund training in state technical institutions and support a number of self employment initiatives. We also try hard to award small contracts to people who have been affected by our projects. If we can place local people in higher level engineering positions we are very happy, but at present they often lack the skills we need. We have also formulated a plan to include the opportunity for equity participation in our projects in the future, which is another step towards local acceptance and ownership.”

Kapoor explains that in the future, HPPCL intends to diversify its power development activities into other renewable energy areas such as thermal, solar and wind power. “The plan to diversify into harnessing other renewable energy sources for generating power is in keeping with our commitment to ensure an environment and ecological balance to support sustainable development,” he says.

“We are already looking at a 500 MW thermal project in partnership with the private sector. In wind we will also aim to work with the private sector. On the solar energy side, we have identified a site, but this form of power generation is less economically viable, so we will need to look for additional state funding. However, the relative capacity of these other projects will always be small in relation to the hydro-electric power that we can generate in the state,” he explains.

As well as diversifying into other clean power sources, Kapoor is also eager to see the organisation leverage its expertise more widely as it matures. “Although we are a government agency, eventually we want to be able to compete with any private professional operator on a worldwide basis. We already have a very strong civil and electrical engineering capability regarding hydroelectric power generation. Here, we are widely regarded as being amongst India’s best. Gradually we will build on and extend this expertise and then look for external projects which can benefit from our technical and engineering strength,” he concludes. www.hppcl.gov.in

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Converting

oil to electricity Saudi Arabia has an insatiable appetite for electricity, which has turned one local business into an international giant, as Jeff Daniels learns

A

lthough it has to be said that not all projects have yet received their financial green light, Saudi Arabia has an impressive programme of converting its oil dollars into other forms of essential infrastructure. Billions are being spent on water desalination plants and even more on ever increasing electricity capacity.

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Arabian Bemco

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Arabian Bemco

Demco Steel After a century of experience, Demco Steel has acquired, throughout the years, a wide knowledge in steel technology that helped establish large business operations in the MENA region.

Our competitive pricing conditions and execution capabilities have earned us a loyal clientele and a reputation that is second to none. We are the main exporter for all kinds of steel, especially plates from 5 to 60 mm used for water and fuel tanks.

We have close relationships with Arabian Bemco and other main contractors in the KSA, as we are their primary supplier of steel products.

Across the country as a whole, it’s reported that investments in an additional 20,000 MW will have been made by 2020 at a cost of well over $100 billion, taking total electricity production to 70,000 MW—much of the increase said to be driven by air-conditioning!

The greatest single centre of activity is at the Saudi Electricity Company (SEC)’s giant Riyadh site, which by itself contributes 10,000 MW to SEC’s Central Operating Area of the national grid.

So far the complex is up to Power Plant 9 and with PP10—currently under construction—output will be increased by a further 20 per cent when it is completed next year. But progress never stops and PP11 is already on the drawing board.

Construction of PP10, a large power plant

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Arabian Bemco

“Bemco has a number of key specialised affiliates and subsidiaries, which enables us to maintain supply of vital equipments, materials and components, as well as subcontracts under our control” complex with infrastructure for 5,000 MW, is in the hands of one of Saudi’s largest construction companies. Arabian Bemco Contracting was awarded the $3 billion engineering, procurement and construction (EPC) contract in June 2008; and by summer 2010, half the plant was already on line.

PP10 is a greenfield project initially based on the installation of 36 simple cycle, base loaded gas turbine generators operating—as are a large number of the generators at Riyadh—on treated crude oil. In addition to preparations for combined cycle conversion, there will also be provision for a further power generation increase during peak demands through turbine inlet air cooling of the

combined cycle power blocks. Initially, however, the simple cycle gas turbines will run without turbine inlet air cooling for an unspecified period of time, to satisfy regional power demands.

Conditions are harsh at the PP10 site, with temperatures that can exceed 50 degrees Celsius or nudge zero. Dust storms can appear out of nowhere, reducing visibility to just a few metres. Desert spec ducting and silencers as well as air intake systems— with self-cleaning filter systems on the air intake systems—are in constant battle with the elements.

Bemco was established in 1965 and is certainly an international giant now. A combination of engineering skills and business acumen—the

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Arabian Bemco

“We put considerable effort into continual in-house staff training in order to remain an industry leader”

GEA Westfalia Separator GEA Westfalia Separator is a leading supplier of system solutions for liquid fuel treatment for power generation. The remarkable success in the Gulf region is especially thanks to the comprehensive support of its subsidiary, GEA Middle East FZE Dubai. This combination of technical and cultural experience

forms

the

backbone

of

fruitful

cooperation with partners like Arabian Bemco.

For the PP10 project, Arabian Bemco recently contracted GEA Westfalia to build a comprehensive crude oil treatment system capable of processing 1200m“ per hour. Having successfully executed this project on time PP10 is proof of the capabilities and dedication of GEA Westfalia towards its partners and the Middle East region.

ability to juggle the many balls involved with complex projects—soon enabled the business to grow and from an early day, SEC was singled out as a client of choice.

Bemco is no stranger to mega-projects such as PP10. It has built a reputation as an EPC contractor capable of competing with the best in the world, particularly on power generation projects using various technologies including co-generation, combined cycle and steam power plants. Throughout this period of energy expansion, Bemco has been linked with some of the largest and most challenging turnkey projects in Saudi Arabia and has often taken its expertise into neighbouring countries.

Bemco has a current workforce of 18,000 people, with 90 per cent of them located in Saudi and the rest spread around neighbouring areas.

Bemco has something of a reputation for relatively short construction schedules and beating

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Arabian Bemco

Bahra Cables Bahra Cables, located in the industrial city of Bahra, is fast becoming one of the leading manufacturers of power cables up to 132 kV in the kingdom of Saudi

Arabia.

The

cables

produced

by

Bahra

Cables are compliant to the standards maintained by both American standards (UL, ANSI and ICEA) and European standards (IEC, BS, NF and VDE specifications). Totally committed to manufacturing and delivery of top class wires and cables, Bahra Cables is an ISO 9001:2008 & ISO 14001:2004 and OHSAS 18001:2007 certified company.

deadlines, as well as bidding attractively low. Henry Cabrera, executive director of Bemco, believes the company’s record of delivering fast track power projects on or before due is a key ingredient for its success as well as the control it has over the supply chain. “Bemco has a number of key specialised affiliates and subsidiaries,” explains Cabrera, “which enables us to maintain supply of vital equipments, materials and components, as well as subcontracts under our control.”

“Nor is there anything better,” says Emad Ghandourah, project development director, “than an over-skilled workforce. We put considerable effort into continual in-house staff training in order

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Arabian Bemco

GEDAC ELECTRIC Since 1978 GEDAC ELECTRIC has manufactured and supplied low and medium voltage switchgear and power distribution solutions from manufacturing facilities in Jeddah.

Arabian Bemco has been a key customer to GEDAC ELECTRIC

for

more

than

a

decade.

Through

the commitment and leadership of the Bemco management and project teams plus the dedication of

the

GEDAC

engineers,

together

we

have

commissioned switchgear solutions throughout Saudi Arabia, typically on the largest power plant and numerous other complex and/or challenging projects.

We salute Bemco and look forward to a long and mutually successful association with Bemco in the future.

to remain an industry leader.�

Behind the scenes, Bemco has also invested heavily in software and IT systems, especially in enterprise resource planning (ERP) which Bemco finds indispensable for best scheduling and controlling its many capital assets. Unlike some organisations, which believe in hiring absolutely everything that is needed on a project, Bemco has gone the other way and put huge amounts of capital into human resources, fleets of construction equipment, and fabrication workshops which are crucial for carrying out operations. But with additional power generation projects showing no sign of slowing up, this expensive capital investment is likely to be put to good use for some time to come. www.arabianbemco.com

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I

ce

Lafa buildin

coun

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Lafarge Cement Zambia

International

ement relations

rge Cement Zambia Plc is a subsidiary of Lafarge, the world’s largest ng materials supplier and a major player in the Zambian construction industry. And its product is in no less demand from neighbouring ntries, as John O’Hanlon learned from newly-appointed CEO Fola Esan

I

n Zambia, Lafarge traces its roots to the former Chilanga Cement, founded in 1949. Chilanga was one of the first large state-owned companies to be privatised in 1994, and the following year it became the first company to list on the Lusaka Stock Exchange. Today the Lafarge Group holds 84 per cent of the shares, with the rest held by pension funds and individual shareholders.

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Lafarge Cement Zambia

A.M. Motors Limited We are a medium sized road transport company based in Lusaka, well known in Zambia for efficient service delivery for over 20 years, since 1985.

We have in-house facilities for the maintenance and repairs of the trucks and trailers with trained manpower. We have radio/real time on-line satellite tracking system with our trucks round the clock. We try and maintain high safety standards.

Our fleet of 60 trucks carries general dry cargo, transporting

within

Zambia

and

to

Malawi,

Zimbabwe, Mozambique and South Africa.

As one of the major employment providers in our sector, we provide direct employment to over 100 permanent and about 20 temporary employees.

sector is commonly used as an indicator of a developing country’s growth, says Esan. “The Zambian government authorities frequently refer to Lafarge’s cement production and consumption statistics to help assess growth in the economy.”

Lafarge has been a key partner to the government, contributing to the development of infrastructure in the economy, and will continue to play a large role in the foreseeable future, he predicts. Not surprising, considering the company has the largest market share in cement and cement clinker.

Furthermore the domestic market is expanding, partly stimulated by increased availability of product out of Lafarge’s cement mills. Demand grew by 35 per cent in 2009, while major export markets like the Democratic Republic of Congo also grew—LCZ is currently exporting an average of 14,000 tonnes of cement to the DRC every

“The Zambian government authorities frequently refer to Lafarge’s cement production and consumption statistics to help assess growth in the economy” Cement production at the Chilanga Plant in Lusaka commenced in September 1951 and was upgraded with the installation of two more kilns in 1956 and 1967.

One kiln at Chilanga was closed due to obsolescence in 1982, which brought the annual Lusaka production capacity to 200,000 tonnes. In 1969 the Ndola Plant kiln was commissioned and in 1974 a second kiln was added. The Ndola plant currently has an annual production capacity of 450,000 tonnes.

In 2006, Lafarge embarked on an expansion programme, adding a further 830,000 tonnes of capacity to the Chilanga plant. At the same time the original production line was closed due to poor energy efficiency. Chilanga 2 is an up-to-date modular plant, allowing for additional capacity to be added as demand increases. The current capacity from both plants is now around 1,300,000 tonnes.

Earlier this year, Fola Esan, formerly vicepresident responsible for strategy and business development in the Aggregates & Concrete division, was appointed managing director and chief executive officer of Lafarge Cement Zambia (LCZ), bringing over 15 years’ experience of international assignments for global multinational companies.

Lafarge is a major contributor to Zambia’s economy.

Activity in the construction and infrastructure

month. Buying Zambian cement is a cost effective solution for Zambia’s huge neighbour because it is relatively easy to transport it by road or rail.

The next biggest export market is Burundi, which takes 4,000 tonnes a month from LCZ. The DRC has embarked on the reconstruction of key infrastructure such as schools, roads and hospitals in Katanga Province, and a $10 million deal was signed earlier this year after the country’s cooperating partners wrote off a $10 billion debt when the country attained the Highly Indebted Poor Countries (HIPC) completion point.

Lafarge produces two types of cement. The flagship brand is Mphamvu, an all-purpose building and construction cement. It also produces and sells Powerplus cement, which is designed for large construction projects and mines. “The merchant channel is the major segment—the drivers of this segment are mainly residential home construction customers, as well as commercial building developers,” says Esan. However, Lafarge enjoys direct relationships with major mining companies in Zambia such as Vedanta, First Quantum Minerals (FQM), Equinox and Glencore.

Cement demand in Zambia and the surrounding sub region is driven by activity in mining,

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residential and commercial construction, as well as infrastructure development such as dams, roads, hospitals, schools and airports, Esan continues.

“The mining, construction and agricultural sectors are still expanding. However, the growth in these sectors is lower than initially forecast prior to the global economic downturn. Tourism suffered due to the recession and so did domestic consumption.”

Since he took up the reins at Lafarge, Esan has embarked on a programme of organisational and cultural change in an effort to enhance operational efficiency. Lean manufacturing is part of that plan; so is the associated metric of health and safety. In June 2010 LCZ became the first African company to achieve membership of the Lafarge Group Health and Safety Excellence Club. “This is a prestigious ‘club’ made up of high-scoring countries in terms of safety. To be eligible, national companies should not have had a fatality in the last two years, and no recorded lost time incidents (LTIs). The group wants 75 per cent of its business units to attain this level by 2015, so LCZ is well ahead of the pack!” he says.

During the induction ceremony of LCZ into the Lafarge Health and Safety Excellence Club, acting commerce minister Catherine Namugala made a point of praising Lafarge not only for its safety record but also its benchmark social programmes and environmental responsibility. She noted that apart from ensuring employee safety, Lafarge Group was also committed to finding solutions to the environmental challenges by committing itself to reducing its gas emissions and thereby helping to deal with the challenge of climate change and contributing to sustainable development.

The company also works with Doctors Outreach Care International, to provide medical services to communities in the areas in which it operates. It’s a programme that enables patients to be attended to free of charge by specialist doctors in their field, with any treatment and medication administered free of charge, and it has been awarded the best Lafarge community relations initiative in the group.

Lafarge is also involved in education and is building libraries across the country. This project is being done in partnership with an organisation called Room to Read that is active in Asia and Africa, and involves building libraries and stocking them with books and other reading materials. In addition the company sponsors girls in primary and basic education. Other activities include sponsorship of clinics, schools and police stations by providing materials and financial support. www.lafarge.com

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n a world increasingly concerned about global warming, where companies and nations are under increasing pressure to cut back on carbon emissions, Zambia has a power generation capability that could become the envy of most developed and emerging economies.

Completely renewable hydroelectric power accounts for 99.9 per cent of its power. This reliance on renewable energy is long standing, dating back to 1938 when the first hydroelectric power plant was constructed at Victoria Falls—the country’s most famous and spectacular natural attraction.

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“Zambia has a power generation capability that could become the envy of most developed and emerging economies” Zambia is ideally placed to take advantage of hydroelectric power. Lying landlocked at the heart of southern Africa, and sandwiched between the Democratic Republic of Congo to the north, Tanzania to the north-east, Malawi to the east, Mozambique, Zimbabwe, Botswana and Namibia to the south, and Angola to the west, the country is the source of two of Africa’s mightiest rivers, the

Congo and the Zambezi. Many of the tributaries that feed these rivers originate deep in its sub tropical interior.

Investment in hydroelectric power seriously got underway in the 1960s, with the construction of the Kariba Dam and hydroelectric plant on the Zambezi. Then in the 1970s, output was increased through the construction of the Kafue

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Gorge hydroelectric power station located on the Kafue River. The reservoir for the power station is the Itezhi-Tezhi Dam located in the Kafue National Park, about 250 kilometres upstream. Meanwhile, two further power stations were built at Victoria Falls while a transmission network was developed to bring that power to major customers and to the areas of highest population density.

Today, some 80 per cent of Zambia’s power is generated and delivered by the national power utility, Zambia Electricity Supply Corporation Limited (ZESCO), which is responsible for the operation and maintenance of all the existing hydro power stations as well as the transmission system, the distribution and supply network, and six small diesel-fired power plants.

something of a challenge in the face of this growth.

Changes to the political landscape in the country over the past 15 years have also increased this difficulty. There have been nationwide discussions about privatisation of the national utilities and this in turn led to paralysis in investment as ZESCO was forbidden to invest in new power generation projects.

By 2008, with generation capacity decreased due to the World Bank-funded Power Rehabilitation Programme, which was aimed at uprating the existing power generation plants, the country was suffering from power deficits during times of peak demand. Realising that demand would soon seriously outstrip supply, ZESCO took unprecedented steps to remedy the situation.

The majority of capacity was being generated

“The company operated a load management plan, rationing supply and maintaining the balance between supply and demand during peak periods” Managed as a parastatal company, ZESCO maintains an ‘arm’s length’ relationship with government: being overseen by a government appointed board of directors and managed by an executive board.

ZESCO supplies power to a customer base of over 390,000 private and industrial customers, and employs some 3,900 staff. Of the 9,450 GWh of power generated, approximately 50 per cent is sold to the mining industry, which has historically been the driver of the Zambian economy.

And the mining industry is currently going through a phase of rapid investment and growth.

With the increase in demand for base metals in recent years, metal prices have shot up on the world markets, stimulating expansion in the existing mines in Zambia, and attracting new mining companies to the country. In parallel with this, there has been significant investment in industry and commerce in a bid to diversify the economy and make it less reliant on mining, all of which has combined to create a steady five per cent growth in the economy and an even larger increase in demand for power.

One of ZESCO’s key responsibilities is the development of Zambia’s generation, transmission and distribution capability to meet public, business and industry demand. And this has proved to be

at Kafue Gorge which produced 900 MW from six generators, and Kariba North Bank, which produced 600 MW from four machines.

Meanwhile, Victoria Falls produced 108 MW from three separate plants and four other small hydroelectric plants located at Lusiwasi, Musonda Falls, Chishimba Falls and Lunzua, between them generating an extra 24 MW. ZESCO’s plan had three elements. In the short term, it encouraged the public, businesses and industry to economise on their use of power: to turn off non-essential equipment particularly during peak periods or to transfer operations to off-peak times, benefiting from off-peak tariffs.

Concepts such as low energy lighting and higher efficiency equipment were introduced, along with occupancy sensors which switch off lighting and air conditioning when a room is not occupied.

And where these economies did not achieve the necessary decrease in demand, the company operated a load management plan, rationing supply and maintaining the balance between supply and demand during peak periods.

In the medium term, ZESCO changed the scope of the Power Rehabilitation Programme to include expansion of the plants at Kafue Gorge and Kariba North Bank. Although the expansion would delay completion of these projects, it would add

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an essential 210 MW of capacity at minimal cost.

Similar expansions were initiated at some of the smaller regional power generation plants.

Looking to the long term, however, it was plain that further power generation capacity would be required, and at last the world is waking up to the potential for green power generation in Zambia.

The Kariba North Bank Extension Project is being undertaken as a joint venture with Sino Hydro Corporation. Construction began on the US$420 million project in 2008 and is scheduled to reach completion in 2012, when it will begin contributing an extra 360 MW to Zambia’s stretched grid. Meanwhile, construction began this year on a new 120 MW hydroelectric plant at Itezhi-Tezhi as a joint venture with Tata, which should come online in 2014.

More recently ZESCO has been appointed by the government of the Republic of Zambia

to manage 35 per cent shares on the new 750 MW hydropower plant called Kafue Gorge Lower, where Sinohydro and China development funds own 65 per cent shares. The construction of this US$1.5 billion power station is expected to start in April 2011 and will be completed in 2015.

The future of power generation in Zambia looks bright and the benefits to southern Africa are obvious. There is the potential to generate an estimated 6,000 MW in hydroelectric power from Zambia’s rivers and so far less than 2,000 MW has been tapped. Opportunities for further development exist in a number of areas including Kafue Gorge Lower, Itezhi-Tezhi, Kalungwishi, Mambilima, Batoka Gorge, Devil’s Gorge and Kabompo. Should just a fraction of these reach development, there should be sufficient green power to satisfy the country’s needs, and to export to surrounding areas. www.zesco.co.zm

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nd safe bus service cannot frica. Mphumudzeni Muneri Great North Transport has antage based on reputation

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ublic transport in South Africa has long been a topic of much debate. Today, competition remains as rife as ever, despite the recent downturn in the economy. One company that has ridden out the tough times better than many has been Great North Transport (GNT).

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Clients using the system have claimed up to 25 per cent saving on operating costs. For enquiries, call +27 31 767 8660/9.

of the century we formed a strategic plan to turn around the business and we started to introduce modern buses. The process continued for several years and we began to see the benefits of the upgraded fleet by 2005.”

At the moment, GNT operates 540 buses with the oldest bus 10 years old and the newest one a mere 18 months old. In total, Muneri estimates that the company has invested in the region of R200 million on its new fleet.

With South African road conditions not always conducive to regular travel, it is not surprising to learn that GNT has a big focus on maintenance. “Road conditions are not great,” Muneri admits. “Most roads have an impact on tyres in particular and the bus lifespan can be affected by the movement of the bus on bad roads. However, the kind of equipment we use includes an excellent chassis on each vehicle and this can withstand most of the bumps in the road.

“As a company, our core function is commuter

“The kind of equipment we use includes an excellent chassis on each vehicle and this can withstand most of the bumps in the road” With headquarters in the Polokwane region of South Africa, the company operates a further 11 bus depots which serve as home to a vast fleet of modernised coaches. “The company had its roots in two separate companies that formed more than 30 years ago,” states Mphumudzeni Muneri, CEO at GNT. “The two companies (called Gazankulu Transport and Lebowa Transport), which were previously homeland-based, were transferred after the dawn of democracy in 1994, following the release of Nelson Mandela. There was a new dispensation and the two businesses were amalgamated in 1996, to form Great North Transport.”

Today, GNT operates within Limpopo province and part of Mpumalanga province; its operational model is based upon negotiated and interim contracts, both governmental and private. “Our customers are more local for now and we operate in rural areas, providing commuter services,” Muneri explains.

At the time that GNT came to fruition, the company inherited a fleet of old buses—which was a situation that the shareholders, board of directors and management team felt needed to change, as Muneri describes: “Around the turn

services and our responsibility is to sell seats on buses—we leave the maintenance to the experts (Scania) who also manufacture our vehicles. They take full responsibility for maintenance and have staff based at all of our depots.”

Aside from maintenance concerns, the fluctuating cost of fuel is something Muneri says is hard to predict, which creates its own challenges when planning a budget. Effective revenue collection remains another priority for the business. “When dealing with cash you have to be on your toes all the time.”

Security is another issue, he says, as when the buses are running the safety of the bus is essential.

“The various parts of that equation include how safe the bus is, our premises and also people and investments. We have outsourced those elements of physical security.”

Part of the challenge to ensure that the operations run smoothly is also to get the ‘people factor’ right.

“Perhaps our biggest challenge is skills, people and capacity,” says Muneri. “We have 1,250 employees and training plays a significant role within the company. Without the necessary skills, no company can grow, so we view our people as

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the most valuable asset we have.

“Our staff development programmes focus on training people up for requisite skills and includes on-the-job training for drivers. We encourage all of our workers to enrol and this includes formal education with external institutions—our drivers have to learn not only how to drive a bus, but also the value of customer service skills. Those in managerial positions are trained not only on how to manage but also on how to approach conflict resolution.”

Following the investment in its new fleet, GNT saw customer numbers progressively rise to a peak of 40 million; but the onset of the economic downturn resulted in falling numbers of passengers as jobs were lost, meaning fewer commuters. Muneri feels that despite the economic problems the country faced, competition remains strong. “You have not only the bus companies to contend with, but also the taxis and informal bus and taxi operators that operate without proper or adequate permits,” he explains.

“During the boom period the market really opened out and continues to be competitive; our advantage is based around the safe, reliable service that we provide. Our drivers are well trained and our buses are well maintained. We also have a good operating system and a schedule that we stick to that ensures the bus will be at its destination on time. Those are the most important aspects to a customer.”

Part of the secret to that success has been investment in technology. Muneri is quick to extol the virtues of the GNT’s tracking systems: “We have systems in place that are used to monitor the buses and driver behaviour. Our auto-data system is pretty up to date and monitors the bus itself in terms of how it is driven and fuel consumption.

We also run an electronic ticketing system which works superbly and helps to improve efficiency.”

The recent FIFA World Cup opened up a number of temporary opportunities which Muneri says GNT were happy to accept, including the shuttling of more than 70 buses from the park & rides to the football stadium.

However, other than making a good impression, he does not feel there was a lasting legacy.

That said, Muneri remains optimistic for GNT’s long-term goals. “The future looks bright and we will continue to explore opportunities, which we feel are unlimited. We will explore markets and will take advantage of opportunities when the market dictates— which could include acquisitions.

“We will also aim to maintain a young fleet of vehicles all the time, so that as the market grows, we can also grow in terms of fleet size,” he concludes. www.gntpassenger.co.za

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Just six years after first setting foot in China, entrepreneur Pete Tom turned a great idea and a set of good contacts into a $7 million turno company. Gay Sutton goes to the horse’s mouth to find out how he d

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e can all have great ideas, but how many people take those moments of insight and opportunity and turn them into successful companies? This is exactly what Pete Toms, owner and managing director of Source China, has done. Some seven years ago he was completing a 14 year stint working in Africa (the last three years in procurement

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and logistics for construction company Civicon in Africa). “For my last three years in Africa I was working in south Sudan, and toward the end of that period the war there was coming to an end,” he explains. “After three years working in a war zone I was ready to move on.”

That was the point at which the first elements of the idea began to form in his mind. “I could see there was going to be a build-up of purchasing for equipment in the region—not just in Sudan but across eastern and southern Africa; and I believed that it would present a great business opportunity.”

Rather than take a long exotic beach holiday to recuperate from the war zone experience, at the age of 36, Toms did something that we usually associate with adventurous students. “I wanted to do something different. So I got a backpack and moved to China—to a remote city in China to learn Chinese.”

The city was Kunming, in south-west China, near the Burma border; and for an entire year, Toms studied 20 hours a week on a language course, spending each afternoon embedding that knowledge by speaking with the many Chinese students keen to learn English. After a year, the lessons had paid off, and provided him with the skills to do business in China. “Now, I can read and write to a certain extent, and I can speak the language. I’m not fluent by any means, but my Chinese is good enough that I can use it for business, which opens doors in many ways.”

The first business break came towards the end of the first year in China. Having maintained close relationships with his old employer, Civicon, he learned they were looking to source prefabricated houses and tyres. Knowing their business and product requirements intimately, Toms went looking in China, travelling the country by train, bus, car—any means—to inspect factories and products. “Then, with a digital camera and a laptop, I sent them quotes, specifications and pictures, and they started purchasing from me.”

As they say, the rest is history. Toms formed the company Source China without needing to draw on any external financial resource. The company has since grown and diversified; today it supplies materials and equipment largely into the construction and transport industries, including cranes and rigging, trucks, trailers and cars, prefabricated houses and a very wide range of parts, materials and equipment. Last year,

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Source China recorded a turnover of US$7 million, employing just seven staff at its offices in Shanghai.

From the sourcing perspective, Toms has built very strong relationships with a number of suppliers and manufacturers in China. “Where we have found good products, we’ve continued buying from that supplier,” he says, “and we have built up great relationships with a number of companies who in turn have a great relationship with the factories. I wouldn’t say we haven’t had issues; but where we have, we’ve worked with the suppliers to solve the problems, to such an extent that many times suppliers have sent us clients, as they know we can deal with them at a higher level of customer service, and we then promote their products, with our services added.”

Having started the company from scratch and performed every aspect of the work himself—from building the website through to negotiating contracts and managing the logistics—Toms has now handed much of it to his second in command, 29 year old Chinese Helen Han, who works from the office in Shanghai, but has also travelled to meet clients in Kenya and Uganda. “I now spend much more of my time travelling to see clients,” says Toms. “Emails are fantastic, phone calls are great, but spending time with them face-to-face and understanding their business is what I want to do.”

This personal touch points directly to the niche Toms has identified in the market. “The Chinese can produce some very good products; but they have weaker customer service, and that’s what

“We have built up great relationships with a number of companies who in turn have a great relationship with the factories” From the customer perspective the growth of the business has happened purely organically: by word of mouth. “My original client, Civicon, introduced me to their business partners and it’s grown from there. I spend a lot of time in Mombasa, which is the gateway into East Africa, and I deal with all the big transporters there. It’s a tight community,” he says.

That intimacy is great for business but can also have its downside. “Equally I’m aware that if something does go wrong, then the news will spread like wildfire.”

Toms has continuously been expanding the company’s reach—largely by building personal relationships, but also through two strategic partnerships. One of these is with Rodrigo Casadei in Brazil—originally an employee of a valued Brazilian client—who brings considerable industry knowledge and experience as well as impeccable contacts. “Brazil is a huge growth area for us, particularly as it’s gearing up in preparation for the 2014 World Cup and the 2016 Olympics. We will be opening an office in Sao Paulo this year,” he says.

“My other partner is Gay Crossley who has a trading company in South Africa and operates from our office in Johannesburg.” South Africa, of course, has been through a massive phase of construction in the build-up to this year’s World Cup.

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I’m aiming at.” Companies attempting to source directly from China find it incredibly difficult to access engineering expertise for the products they are buying, or indeed the spare parts they require. However, having acquired six years’ of experience and knowledge in China with Chinese spare parts, suppliers and engineers, Source China is in a position to be able to provide all.

Cranes are a great example of this. The company deals with XCMG cranes located in the city of Xuzhou—the third largest crane manufacturer in the world. “But they supply very limited services for anything they sell outside of China. So I buy either direct from the factory or from the market and supply them to my clients,” he explains. Then if there is a need for it, he can take Chinese engineers to the client to help with training and support.

“Two months ago, I took Chinese crane engineers to Angola with me to repair a crane which had fallen over and been damaged. They repaired it in three days and the clients had been working on it for two years. He also provided training on the crane. And because he only spoke Chinese, I translated for them.”

Supply of spare parts is also a major part of Source China’s activity. “We put our Source China plates on every single machine we sell,” Toms explains. “These specify the technical details of

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the machine. And we hold files that detail the specifications of the machine that carries that number. I can see exactly which hydraulics, cylinder heads, pistons and bearings a machine uses, so we can quickly identify the spare parts our client needs.” And because the company is very familiar with manufacturing in China, it is able to procure the parts quickly and inexpensively from the part manufacturer rather than the OEM. In recent years, Source China has undertaken some interesting projects beyond its staple diet of construction and transport equipment. It is the largest supplier of wheelbarrows to Mozambique; has sold 47,000 bicycles to the Democratic Republic of Congo over the last two years; sources chemicals, injection moulding equipment and bicycle valves for Brazil; and is currently supplying 36 prefabricated houses and their contents for Angola—which will require the presence of Chinese engineers to oversee erection. This project took Source China to buy from 48 different suppliers, where they consolidated to four different ports, and shipped in 36 40HQ shipping containers—quite some logistical operation. And last but not least, it’s supplying marquee canvas wall sections for a company in Canada. “My third partner Kevin Smith, who works completely in Chinese and operates out of our Shanghai office, has done a fantastic job on this project. I can’t believe how tenacious he has been on getting that right. Getting Chinese material to pass the California State Fire Marshal requirements is quite an achievement.”

There are still some mountains to climb. With very prescriptive procurement policies, “many of the very big companies are too big to deal with me for large items of equipment,” Toms says.

“However, they order spare parts from me, and I’m hoping that I can move my way up the chain.”

In the long term, Toms has a whole range of options ahead of him. “China is definitely not dry: there are many more products there, for us to add our services to. But things are getting more expensive. Brazil has massive resources and major assets, so having a presence there will be a huge advantage, as will our presence in South Africa where there is some great low cost manufacturing,” he explains. “So I’m thinking in terms of Source Brazil in the future, or perhaps Source South Africa. Which way do I go? I don’t know yet.” www.source-china.org

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Bold

gold produc The meteoric growth of Perth-based Catalpa Resources has been down to a solid strategy and a culture of excellence— as well as a dash of bravery, as managing director Bruce McFadzean tells Andrew Pelis

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daring escapade in the 19th century serves as a reminder of the core values for one of Australia’s leading growth businesses. In 1876, the Catalpa rescue saw the escape of six Irish prisoners from the then penal colony of Western Australia, who escaped on a boat called the Catalpa. The risk involved, and the bravery of those concerned—who managed to overcome enormous odds—has only added to the event’s notoriety.

In August 2008, the boat involved lent its name to Catalpa Resources, an Australian gold mining business formerly known as Westonia Mines Limited, that has seen phenomenal growth ever since.

Prior to the change of name came the arrival of Bruce McFadzean, managing director and CEO. With experience in the gold mining sector stretching back to the 1970s, McFadzean set about delivering profitable operations for the ASX-listed business.

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“I arrived in June and decided in August that we needed a name change and we selected Catalpa— which has a fair bit of meaning around here. The story of the Catalpa rescue embodies everything that our organisation stands for: we are bold, brave, gutsy, well planned and successful,” he comments.

Catalpa is a gold mining company running two operating mines. The Edna May mine (located between Perth and Kalgoorlie in Western Australia), is owned 100 per cent by the company and produces 100,000 ounces of gold each year. Catalpa also owns a 30 per cent share of the Cracow mine (in a joint venture with Newcrest Mining) which also produces 100,000 ounces per annum.

Catalpa’s capital raising flotation in 2002 produced $100 million of investment—enough to purchase the assets that now stand Catalpa in good stead. The Edna May project, McFadzean says, had a long history of production and closures since its initial mining operations in 1911. It has been reopened by Catalpa, who commissioned it back into production last May. Similarly, Cracow had first begun production in the 1930s and had a succession of closures and reopening, with 2004 heralding the latest era.

“Westonia was more of an exploration company,” McFadzean explains. “It really laid the foundations for what we have today at Edna May. The capital we raised enabled us to construct a large gold processing plant.”

So why resurrect a gold mine for the umpteenth time? “Edna May had been run a certain way before and we felt that given gold prices, the strategy simply needed to be applied differently to make it profitable. There has been no real rocket science to what we have done, but we’ve restructured it now to generate in the region of $70 million a year

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for the next ten years,” McFadzean explains.

Edna May is currently an open pit operation with a mine life of nine-and-a-half years, capable of producing 100,000 ounces a year. “We know, however, that the ore bodies are open to the east and west at a depth, so we are spending several million dollars right now to test the depths, with a view to targeting underground mining operations by 2013,” says McFadzean. “Our aim is to reach 150,000 ounces of production each year for the next twelve to fifteen years.”

Cracow, in contrast to Edna May, is an underground mining operation producing a higher grade of gold (7.5 grams per ton) and comprising multiple ore bodies. McFadzean suggests that Cracow contains over 1.4 million ounces in resources and currently two-and-a-half years in reserves—but being underground, it is expensive to drill. “We have mining inventory for the next five

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to six years but plans for ten years,” he explains.

“At present our joint venture is investing around $10 million a year on further exploration of Cracow.”

Such is the allure of gold that at the height of the global economic downturn, Catalpa Resources was able to secure sufficient funding for the Edna May project in April 2009. McFadzean says that the feasibility study conducted in 2008 highlighted just how profitable operations would be; and by February 2009 the business had secured $65 million in funding from a bank. March and April 2009 saw a further $40 million in funding raised through placement and entitlement offers with shareholders.

“Since then, our investors have seen three-and-ahalf times growth,” McFadzean confirms.

The rewards have been generated to an extent by the construction of a $92 million, three million ton processing plant, which helped to get Edna May’s operations up and running. The growth of the business since then has been meteoric. “When I joined two years ago I was employee number four in the company,” says McFadzean. “Today, we have 155 employees, including sub-contractors.

“We are in a rural district and tend to focus our recruitment drives on local residents to whom we provide extensive training,” he continues.

“The remaining workforce are experienced in mining and typically come from Perth [Catalpa’s headquarters are in West Perth] and Kalgoorlie.”

In spite of the success Catalpa currently enjoys, McFadzean feels that there is no room for complacency.

The company is committed to focusing heavily on safety, the environment and its people. “Those are aspects you simply must get right. We also strive for

Catalpa Resources Ltd

Donhad Congratulations to Catalpa Resources and the Edna May Gold project team! As a 2009 junior gold producer you took on the Edna May Operations gold project; now you are well on the way to being a well respected and sustainable mid tier gold producer.

As a supplier of grinding media to Catalpa’s Edna May Operation, it is a pleasure to work with your people and systems.

operational and technical excellence. It’s a simple recipe: having sound assets, great people to extract and optimise the assets, and growing the people within the organisation. It’s all about establishing a culture of excellence and output.”

The transition of Edna May to include underground

mining is one that holds few concerns for McFadzean.

“In Australia, mining is a large part of our world. We rely on lots of support from the industry and can contract out the supply of equipment and maintenance.”

Looking forward, the company’s five-year strategy will take it from production of 130,000 ounces per year to over 500,000 ounces. “We are only two months in and have a strategy for organic growth at our existing sites,” comments McFadzean. “We also have an acquisition plan and will assess opportunities in Australia as well as overseas, where the African and Asian markets interest us. Our vision is that Catalpa will be a safe, significant and successful gold company, focusing on delivering rational growth, cash generation and stakeholder reward.”

As a company that has grown its market capitalisation from $15 million to over $300 million inside 18 months, it appears McFadzean’s goals remain firmly on course. www.catalparesources.com.au

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Rising from the ashes The story of Frontier Mining is one of an amazing turnaround. Jane Bordenave finds out how the company went from bust to boom in just 12 months

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hile it is listed on the London Stock Exchange, Frontier Mining is in fact a Kazakh mineral exploration and development operation that has been working in Kazakhstan since 1998. It is involved in gold and copper mining and was bought in 2009 by a group of investors led by entrepreneur Erlan Sagadiev.

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The first 10 years of Frontier’s life were difficult, to say the least. The company was originally set up by a group of American mining experts and geologists who had been working in Kazakhstan on various projects largely related to the US government but who then decided to strike out on their own. While they had the technical knowledge, unfortunately regulatory constraints held the firm back and it was only able to bring online its poorest asset, the Naimanjal gold mine, located in the north-east of the country.

In November 2007 the company purchased 50 per cent of the Benkala copper project, situated in western Kazakhstan, in a joint venture with Coville Intercorp Ltd. This $21 million investment was made through cash and shares; however, it was not enough to put the mine into production, which had a negative impact on the organisation’s shares. Despite overtures made to the markets, no one was willing to invest due to the global economic crisis and by the end of 2008, with shares worth 0.1 pence, the organisation was on the brink of bankruptcy.

It was in early 2009 that Sagadiev stepped in with a rescue package, providing a much needed lifeline. Initially joining the company as president of Kazakh operations in the February, the following month he was made CEO and chairman. “Frontier Mining was a great opportunity for investment,” he says. “The company had some great assets which were near production and I saw that it could be turned into a very successful business.” By April, he announced he was giving the business a $10 million credit line, of which he had put in an initial $4 million cash investment. His investment

in the company alone brought the value of shares up to 15 pence, although this has since settled to a stable five pence.

Having renewed the package earlier this year, the group of investors led by Sagadiev has in effect invested $20 million into the company, in order to make it viable once again. This was a distinct risk—although Frontier had at the time a 50 per cent share in the Benkala project, to date only exploratory excavations confirming the deposit have been carried out. However, this risk is mitigated by Sagadiev’s extensive knowledge of the Kazakh business landscape and how to negotiate the red tape that had ensnared the previous management.

The company is now in a position to merge with Coville Intercorp, which will give it 100 per cent ownership of the Benkala venture. This is a very significant development, as it will allow Frontier to bring Benkala online within the next 18 months. It will also facilitate growth without capital expenditure, as through the merger the firm will acquire a gold mine in Russia currently owned and operated by its joint venture partner.

The Benkala project is a $20 million investment that represents various challenges and opportunities for the organisation. It is an oxide/ sulphide copper deposit located within the Urals copper/gold ore belt and, as it was a completely greenfield site when it was acquired, the firm has had to engage in an amount of traditional drilling to ascertain its quality and size. These investigations have revealed that the deposit contains just under 2.8 million tonnes of ore, worth $490 million.

“Although we do of course have other assets,

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Benkala is the largest and is also, conveniently, the closest to the production facility. All these factors are very important and combine to make it our most significant and most valuable site,” Sagadiev explains.

The extraction process will take place in stages, with an initial extraction rate of 7,000 tonnes per annum starting in the final quarter of 2011, and gradually rising to full capacity of 20,000 tonnes.

With this in mind, Frontier Mining is building a production plant that will be able to handle this capacity straight away, although initially it will be running at 35 per cent capacity.

The facility is being designed by Calder Projects Services, an Australian technical consultancy; however, components are being largely sourced locally in Kazakhstan. When it is completed, Benkala is projected to be the most technologically advanced site of its type in the country. Although investments have been made in bringing electricity and potable water to the site, there is much infrastructure already in place, particularly in terms of transport links. This is an important bonus for the company, as it will facilitate export of product to countries such as China without the need for extensive capital expenditure.

However, the site is greenfield, so Frontier has brought in Wardell Armstrong, a surveying company that specialises in environmental development and management. This consultancy has helped Frontier ensure that its operations have as minimal impact on the environment as possible, as well as ensuring environmental safety such as preventing pollution of the water table.

Frontier also believes firmly in staff training and continuous professional development, with education for personnel taking two forms. Firstly there is the basic training that enables the company to comply with the terms of its mining licence— ensuring that its workers are aware of health and safety issues and how the plant works, even if they are already experienced. Secondly, it provides supplementary training related to each worker’s role. This could be basic skills such as first aid, or more specialised training such as sending a staff member on a university course. What matters to the company is relevance—enriching the knowledge base of its people in a way that will also bring new skills and expertise to the company. “Our goal is to become a world class company and unless we continue to improve our team we cannot get

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there,” says Sagadiev. “Therefore we understand the importance of strengthening our personnel and improving their overall knowledge and skills.”

While current production rates are small, Frontier’s plans for the future are big. Within five years, not

only will Benkala be producing at full volume, there are also plans for expansion in that area and increased output. “By 2015 we should be producing 40,000 tonnes of copper and 40,000 ounces of gold per year. At this stage we will be generating a cash flow of over $300 million, giving us very substantial market value,” explains Sagadiev. Contracts selling copper to refineries in fast growing markets such as China are also in mind, and subsequent listing on the Hong Kong stock exchange if all goes well.

All of these factors will make Frontier Mining a significant player in the world copper markets, as well as an extraordinary example of a successful turnaround. To get from the verge of bankruptcy to becoming a growing company within 12 months has been impressive enough; but with Sagadiev at the helm, his expertise is bound to lead the firm on to even bigger and better things. www.frontiermining.com

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hipyard is the oldest d in the world. Sales alks to Andrew Pelis d future for Croatia’s hipbuilding industry

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or nearly 300 years, the Adriatic coastline has been home to what is now the world’s oldest uninterrupted shipyard. Established in 1729, the Kraljevica Shipyard has survived wars and the multiple advances in technology and ship design; but today, it faces a new wind of change as Croatia ramps up for entry into the European Union.

“Our main objective is ship building, which accounts for around 90 per cent of our business. We also undertake ship repairs,” states Dragan Badzek, the shipyard’s sales manager.

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“We can build almost anything below 125 metres in length from our three slipways including naval vessels, passenger vessels, oil tankers and fishing vessels. Over 95 per cent of the ships in the old Yugoslavian Navy were built here,” he adds.

Badzek says that since the end of the Second World War, the shipyard has been responsible for producing over 150 vessels from facilities that now boast new buildings. It can provide retrofitting and repair work to naval vessels (gun boats, patrol vessels, missile corvettes), coastguard boats, special-purpose ships, fast crafts, light commercial crafts and yachts, built of ordinary or high strength shipbuilding steel and aluminium.

help solve the shipbuilding problems in Europe.

It has been decided that the issue will be better addressed by privately-owned ventures.”

In the meantime, Kraljevica continues to develop, and is currently constructing a painting hall that will improve efficiency and introduce a new anticorrosive treatment system once it has been officially opened later this year. Painting is one of the areas where the business relies on its 300 sub-contractors, hired not only to paint but also to undertake electrical installations and interior outfitting work.

The sub-contractors work alongside the shipyard’s 530-strong workforce that focuses on steel and piping production and the installation

“Our main objective is ship building, which accounts for around 90 per cent of our business. We also undertake ship repairs” So what has been the secret to Kraljevica’s continued success? “We have never had any complaints from owners; the excellent quality of our vessels means that owners give us our best endorsement by word of mouth,” Badzek comments. “We have also always offered flexibility, and have been able to build all kinds of vessels, which helped us to find niches in the market. When times have been quiet (such as during the Balkan War when we could not find international work), we have been able to still carry out repair work.”

Whilst the Kraljevica Shipyard has survived all sorts of turmoil, it now faces a new challenge.

The Croatian Shipbuilding Company Ltd was established in 1994; and in 1997, as a result of a decision made by the Croatian government, it was merged with the former Association Jadranbroad, forming Hrvatska Brodogradnja – Jadranbrod (the Croatian Shipbuilding Corporation – Jadanbrod), a joint company comprising five major Croatian shipyards, in which the Croatian government holds a majority share.

That organisation is about to change, however, as Croatia strives to join the European Union, as Badzek explains. “All Croatian shipyards are now going through commercialisation and we will eventually have a new owner as a result of this process. The Croatian government currently owns the shipyard and is working with the EU to

of engines. The 100,000 square metre facility saw large investment at the start of the century in CNC lathe machines including two plasma engines: one for underwater work and the other for dry work.

“We also operate the latest 3D modelling and documentation software that we can programme and send to the CNC machines,” adds Badzek.

The nature of the work can vary and Badzek believes that the company’s flexibility and willingness to take on smaller projects has given it a competitive edge. “Our vessels are custom-made and usually the customer will come to us with a specific idea and we will sit down with them to define the details. It is difficult for us to be too efficient, given that we will take orders for one or two vessels in a series but this gives us an advantage too—our average customer may not be welcomed by some of the bigger shipyards, for example in the Far East, because of the size of the order.”

Steel prices have of course stabilised to some extent over the past five years and Kraljevica has the capacity to stockpile up to 2,000 tonnes of steel (enough to cover three months of work) at a time.

Along with the propulsion systems, Badzek suggests that this is the biggest capital outlay at the shipyard.

As the shipyard prepares for the future, it is now undertaking the necessary measures to attain ISO quality certification. “We already operate an internal quality control department and two months ago,

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“We have always offered flexibility, and have been able to build all kinds of vessels, which helped us to find niches in the market” we signed the contract with the aim of achieving ISO standards. Of course we have to adhere to rigorous procedures when we are building Navy ships, so we are confident that we will achieve our goal in early 2011,” Badzek explains.

Lead times are always one of the biggest challenges operationally. “We operate to an average lead time of around 24 months on most vessels; but it is essential to us that we are able to deliver the ship on the right date, and this can be a challenge when we are receiving new orders all the time.”

With Croatian interest rates higher than most European countries, Badzek says that the structure of financing is compromised to some extent. “At the moment we have a situation where interest rates are three to four per cent higher than other

countries, which makes loans more expensive, particularly when you are working on a €20 million vessel. At present the only way we can address this problem is by introducing greater efficiency.”

Despite the uncertainty, Badzek says that Kraljevica should have a new owner before the end of this year; and whoever takes over the company will be purchasing a business with an order book full through to the end of 2012. “We are currently working on a RO-PAX vessel for a Canadian customer—a one-off 95 metre yacht. At €40 million, it’s the most complex project in the history of the shipyard. We have also signed a contract in Moscow and Tromso to build four fishing vessels, so our new owners will be busy for the next two years,” he concludes. www.brodkr.hr

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Operating in a wide Flexicon Piping is w in infrastructur takes its place on the Mike Enslin explains company has dive

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e range of marketplaces, well placed to play a role re development as Africa e world economic stage. s to Gay Sutton how the ersified during recession

Flexicon Piping Specialists

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t may have been a tough few years for businesses around the globe but for Flexicon Piping—a subsidiary of the First Tech Group since 2005—the slowdown in its major marketplace has been an opportunity to strengthen the company by branching out into new industry sectors.

Established in 1987 by current CEO Craig Hanekom, Flexicon is a leading player in the manufacture, fabrication and installation of high density polyethylene (HDPE), polypropylene piping (PP) and polyvinyl chloride (PVC) piping in southern Africa. With its headquarters in Witbank, 125 kilometres east of Johannesburg, the company offers complete turnkey solutions in both large bore and small piping—ranging from 50mm to 1,000mm—working with clients from the feasibility and design stage through manufacture to full pipe work installation.

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Each project is assessed for size and volume, and is then assigned to a project manager who provides the personal attention to detail and quality, seeing it through to completion with his own team and crew. When time is of the essence, fast track work can be done to expedite an urgent project. Customer care also extends beyond installation to a range of additional services including pipe work maintenance, and a rapid response team that can be sent out to repair old and broken pipes on a breakdown basis.

For many years, the majority of Flexicon’s work was focused on servicing and supplying Africa’s growing mining sector where the qualities of HDPE piping had been quickly recognised.

Strong, lightweight, anticorrosive and highly abrasion resistant, it had proven ideal for safely and reliably carrying mining slurries. But as the economic crisis hit industry around the world, the demand for metals decreased. “We weathered the slowdown of the last few years very well. But it obviously made us look at different industries, where we had previously concentrated largely on mining,” explains Mike Enslin. The company had already began to diversify into civil construction in the run-up to the 2010 World Cup—the huge investments that were being made into national infrastructure, stadiums, hotels and leisure facilities required large amounts of pipe work that Flexicon was able to fulfil.

“We’ve also been heavily involved in the recent boom in power plant construction, and we have diversified into other sectors such as water treatment,” Enslin continues. “However,

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the mining industry is now continuing to grow and we are working across the whole of southern Africa, in places like the Copper Belt in northern Zambia, Angola and southern DRC. Anywhere that needs to convey water or mining slurries, we can provide the piping.”

Today, Flexicon operates out of five South African branches, and has registered companies in Namibia and Zambia. The location of these offices clearly reflects the importance of the mining focus. The Richards Bay office services the mines of KwaZulu Natal; the Rustenburg branch is close to the nation’s platinum mines; while the Springbok branch is convenient for the diamond mines of the Western Cape as well as other mining interests. The newest office, which was opened in 2009, is located in Port Elizabeth and serves the civils industry in the Eastern Cape area.

Manufacturing is undertaken at a purpose built factory facility at Meyerton, 60 kilometres south of Johannesburg. “Since the takeover by First Tech Group in 2005, the facility has been run for us by our sister company Ogatin, and it continues to manufacture solely for Flexicon,” Enslin explains.

Considerable investment has been made into the plant in recent years, including the purchase of four new HDPE extrusion machines capable of extruding pipe ranging from 50mm to 1,000mm.

Meanwhile, the majority of the fittings and pulled bends are manufactured at a factory facility located at the Witbank head office.

Some 250 to 300 staff are employed across the organisation, the numbers fluctuating to accommodate the size of projects in progress. For larger projects in particular, increased numbers of skilled welders are required and these staff are employed permanently. For permanent staff, there is a continuous regime of training in place to ensure the highest level of skill and product quality. “We have welders working in the factory on the fabrication work who have been with us for many years,” says Enslin. “And just like the steel industry, we send all our welders to be certified and coded. And that training is ongoing.”

Although the majority of Flexicon’s contracts continue to be with the mining industry, the company also works across a range of other sectors including chemical works, power stations, steel factories, breweries, distilleries and soft drinks factories, oil refineries, sewage works and water

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treatment plants. One interesting application for the HDPE, PP and PVC piping is in renovating old steel pipelines by the relining or slip lining method.

The great benefit of this process is that the new pipe is inserted inside the existing one, and the job can therefore be achieved with the minimum of disruption, resulting in a saving of up to 50 per cent on the cost of a complete replacement.

Among a number of lucrative contracts that Flexicon has completed recently is a two-and-ahalf year project for Roshcon—the infrastructure development subsidiary of South African power company Eskom. Valued at R40 million, the contract included the supply and installation of all the water supply systems and sewerage system for the Marapong housing scheme at Ellisrus, which is being constructed to house workers at the new Medupi power station near Lephalale, Limpopo.

Eskom has been a regular client for Flexicon,

another recent project being the replacement of all the underground pipelines at a nearby power station in Middelburg, Mpumalanga.

Looking at other industry sectors, the company has recently completed a R12 million contract to supply and install overland pipes for the water reclamation project at the Optimum Colliery at Pullen’s Hope, Mpumalanga.

Flexicon continues to extend its influence throughout Africa, recently winning a contract to supply and install HDPE pipework for the oil company Shell in Gabon, replacing the existing galvanised steel piping.

With such a wide portfolio of capabilities, and with Africa touted to become the next major global growth area, the future looks bright for Flexicon—a company that intends to play a significant part in infrastructure development in all corners of the continent. www.flexiconpiping.co.za

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Kenya Bus Service Management Ltd

Kenya’s transport service poses many challenges to bus operators. Edwins Mukabanah, managing director of Kenya Bus Service Management Ltd tells Andrew Pelis how his company is making a real difference in Nairobi

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he challenge of running a successful bus service in Kenya is one fraught with difficulties and danger. But against the backdrop of failed enterprises, corruption and gangsters, one company has adopted a new approach—and is now making great headway in Nairobi.

The story of Kenya Bus Service Management Ltd has its origins in bus operations in Kenya’s capital city, stretching back over 25 years.

That was around the time that the company’s managing director Edwins Mukabanah first became involved with the business’s forerunner, Kenya Bus Services Ltd. “The old company was established here back in 1934 and had a branch in Mombasa,” Mukabanah explains. “It was originally owned by United Transport of London but shares were later sold to Stagecoach, before they sold the business in 1998 to a group of local investors. They operated the company until 2005 when it collapsed and at that point, I decided to create a company based on the principles of National Express [the UK-based coach operator], where a brand is used to run fleets for other people.”

Mukabanah had seen first-hand how UK bus companies worked, having spent three years there studying transport planning and management at the University of Westminster and later working for Stagecoach. His knowledge and experience gained while working for Stagecoach under Transport for London was invaluable to the Kenyan company as it sought to develop a new model. It is rare in Kenya to meet one like Mukabanah who combines many years experience of hands-on public transport operation and professionalism.

However, the reasons for the old company’s collapse were far from easy to remedy, as Mukabanah explains. “In Kenya, the market is filled with paratransit operations which provide an informal, unscheduled, profit-driven service which is unreliable. These kinds of operations do not pay the true cost of labour. This mode of transport does not offer fixed routes or fares, and the old company was competing against these operations that encourage unfair and wasteful competition.

“Furthermore, the industry is unregulated and there has been a succession of failed bus companies in the country as the paratransit model tends to move towards smaller capacity—typically minibuses.”

Aside from the competitive nature of the sector, Mukabanah says there are other factors that act to the detriment of legitimate transport

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Kenya Bus Service Management Ltd

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We are proud to be associated with Kenya Bus Service Management Ltd. Their level of management gives us confidence when providing insurance cover to the vehicles under their portfolio.

operate in the Central Business District of Nairobi and could travel along certain routes.

“Today we have grown to run 152 franchises which own up to seven buses each and in total we have 292 buses that operate under our brand,” he continues.

The company has encountered many challenges concerning the lack of regulations when it comes to enforcing the brand. “The laws in Kenya on infringement are very weak,” says Mukabanah.

“Even so, although many of the vehicles are small, we have a very visible household brand and look forward to the government legislation on an Integrated Transport Policy, which will encourage grouping and franchising.”

Aside from the operating model, another big difference between Kenya Bus Service Management and other transport providers is the age of its fleet. Mukabanah says that his company owns fleet assets totalling in the region of 800 million Kenyan shillings (US$10 million) and

“Today we have grown to run 152 franchises which own up to seven buses each and in total we have 292 buses that operate under our brand” providers. “Issues like congestion, accidents and pollution all regularly occur, while the road surfaces are in many places very poor and riddled with potholes; but there are also problems with cartels who control certain areas, making some routes inaccessible. There are also gangsters who extort money from bus companies.”

Given the extent of the problems facing bus companies in Nairobi, it is heartening to learn that Kenya Bus Service Management is making good inroads into changing the model of transport in the capital. Today, the company transports around 2.9 million passengers a month.

One of the first things Mukabanah did in mid 2006 was to approach local bus companies to join his enterprise as franchises. “I saw that to operate in this situation, one needed an individual operator to apply some degree of micro management with standards that were acknowledged within a brand. I had a small fleet of vehicles and invited small companies to become a part of our enterprise. Although there was initially a lot of rejection, this changed when businesses learned that I had obtained a license to

the average age of a bus within his company’s business is three years (although these are owned by the individual franchisees, including some who only offer services at weekends). Other operators, meanwhile, purchase much older vehicles from countries like Japan and then adapt them to Kenyan needs. Currently Kenya Bus Service Management receives around 40 to 50 buses each year.

The next phase of the company’s plan is to create value through associations with other businesses like fuel suppliers. This is especially important, says Mukabanah, as fuel constitutes 40 to 50 per cent of operation costs and has increased by up to 20 per cent over the last couple of months.

Other partnerships could include bus suppliers and insurance providers.

Maintenance remains an issue, with the vehicles needing durable chassis to drive over the terrain; although Mukabanah feels that the Kenyan government has done a lot to improve the condition of roads in Nairobi over the last two years.

The standard of drivers, he says, is more of a problem, so another exciting initiative that

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the company has introduced has been the only Passenger Carrying Vehicle training school in Kenya for drivers and conductors. “Over the last four years we have rented premises, and we spend over one million shillings each month. The site has a garage, which is important as there are no local authority depots in Kenya, and a training school.

We charge a fee for each inductee as the people we train will often acquire a Kenya Bus Service Management certificate and find work elsewhere more easily. We have put over 950 drivers through our training and some 1,081 conductors.”

Mukabanah says that his company’s approach is redefining the future of public transport operations in Nairobi, and that is likely to magnify with greater use of technology. “The original firm was the only computerised bus company back in the 1980s, and when it went down we decided to create in-house programmes that aide our accounts, maintenance schedules and rotas. We

also use ticket machines from the UK and we are now looking at the option of introducing a pilot cashless ticket system which will help to end corruption, cartels and theft on buses in Nairobi.

Information technology is the key to changing this industry in a developing country.”

Kenya Bus Service Management being the only member of the International Association of Public Transport in Kenya (where they gain from sharing international best practice), Mukabanah sees a future where his company can help the government to shape definitive guidelines and legislation that may lead to Kenya Bus Service Management moving into leasing and management. Already the business has received enquiries as far afield as Kampala in Uganda, Juba in Southern Sudan and Dar Es Salaam in Tanzania.

“We will see if we can operate in Mombasa eventually, but only after we have good legislation and the necessary transport management institutions in place,” he concludes. www.kenyabus.net

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Red Crescent Resources

rn The metal and mineral resources of Turkey have been under-exploited for decades. Afrasia Mining and Energy Consulting (AME) and Red Crescent Resources (RCR) are bringing South African and global expertise into alliance with local knowledge. Ruari McCallion found out more

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he CEO of Red Crescent Resources and Afrasia Mining and Energy Consulting, Alan Clegg, began his working life in the coalfields of north-east England; but it wasn’t long before he moved to South Africa and developed his career with Goldfields Group and Anglo-American. Now a 34-year veteran, he has been involved in private mining exploration, development and consultancy companies since 2001, when he got involved with Engineering Consulting Partnership TWP (Townshend Van Der Walt & Partners).

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Red Crescent Resources

Platinum Offshore Management Services, Inc Barbados’ reputation as a respected, well-regulated international financial centre is unquestionable. Its extensive tax treaty network is an ideal platform to invest in international mining operations in a tax efficient manner.

Platinum Offshore Management Services, Inc. is a team of qualified professionals based in Barbados.

Platinum’s core competence is general management, accounting and corporate services. With a track record for executing the investor’s tax plan, Platinum is the preferred Manager of the Barbados subsidiaries, with clients engaged in various industries and doing business around the world.

Our association with valued clients like Alan Clegg of RCRB allows us to achieve global competitiveness for the overseas investors and to facilitate growth in the business operations.

“We achieved some spectacular growth levels— up to 240 per cent a year,” says Clegg. “By 2004 and on track towards the planned IPO, we recognised it was time to look beyond our core market in South Africa. I identified Turkey as an excellent prospect and a potential springboard to Central Asia and the Middle East which would be foundational to future growth.” TWP set up an operation in Turkey in 2006, TWP Eurasia A.S., but post the 2007 IPO decided it wanted to remain focused on Africa. Clegg, however, remained committed to the original vision and made an MBO through which AME was born in 2008.

“AME is a full-service consulting company,” he says.

“We offer exploration, feasibility, development and EPCM (engineering, procurement and construction management) expertise.” It covers everything from start to finish, including infrastructure and mine closure plans. “We now have around 35 engineers on our staff; we operate projects in Morocco and provide consultancy in Tunisia, Saudi Arabia, Turkey, Kyrgyzstan, Kazakhstan and Tajikistan.” AME is based in Ankara, Turkey and, crucially, it has strong Turkish involvement. “There are strong historical links between the Turkiç countries and we find it is easier to do business as a Turkish company.”

The ownership of both AME and RCR is mainly vested in Clegg, as executive chairman and CEO, while Dr Zafer Toper, general manager and operations director of AME, is also an owner.

In RCR the core commodities focus is on base and ferrous metals project development, while solids to gas (STG) and gas to liquids (GTL) from coal is another area of focus for AME and its sister company SAT Enerji A.S. (SATE). All have important roles to play in the sustainable growth and development of the Turkish economy.

“Turkey imports 94 per cent of its liquid fuels,” says Clegg. “One of the country’s goals is to produce 30 to 40 per cent of its liquid fuel requirements from processing of its coal reserves.” Processing requires different and new techniques other than those used in South Africa by Sasol. “We are in the process of attempting to develop partnering with an International Energy Group from the UK and the Turkish state coal company in a project that is seeking to realise opportunities in this field.”

However, the immediate focus for RCR and a significant part of AME is the Hakkari Zinc Project, in the south-east of the country. RCR and the Seyitoglu family, which is well-established and with extensive commercial interests in southeast Turkey, agreed to establish a joint venture to explore, develop and exploit the family’s holdings in the Hakkari area, RCR Zinc.

“The zinc oxide deposits in the region are of very high grade,” says Dr Toper. “There are a lot of small operations in the region, which mine the ore, crush it and sell it through traders, in particular the Chinese. The run-of-mine ore sold to date is up to about 35 per cent zinc with around 4.5 per cent lead. We are looking at beneficiation—adding value to the product.”

Two projects under active consideration are investment in zinc sintering by rotary kiln precipitation, in order to raise zinc content to 55 to 60 per cent; and further refinement to LME (London Metal Exchange) grade, 99.99 per cent.

RCR’s independently executed metallurgical tests indicate that Hakkari ores lend themselves to direct leaching solvent extraction. “Because of the high grade, only a low concentration of sulphuric acid has been indicated as being needed for maximisation of metal recovery. Our pre-project analysis and feasibility study will include plans for mitigation of environmental impact.”

The strategy of RCR is to build the company’s value post the imminent listing on the Toronto Stock Exchange (TSX) through to $400 million by 2012 and $1 billion by 2014, which is very ambitious, given that its expected market capitalisation value is around $80 million. It can only achieve that level

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of growth by selecting its sites carefully. It requires that its operations should be in the bottom 25 per cent of the cost curve—i.e., the cost of extracting the zinc should be well below the world average— and will provide an un-geared investment rate of return of at least 23 per cent, with 30 per cent margin a realistic possibility. The Hakkari project looks as if it meets both criteria.

“We have 26 licences totalling over 50,000 hectares in a 70 by 20 kilometre target area,”

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says mining engineer Mohammed Arar. “Our laboratory scale metallurgical tests are showing positive results, in the 90 per cent recovery range.

After we had completed those tests we started to expand operations, and commenced a drilling programme in 2010; we expect to reach a total of 3,000 metres drilled by the end of December.”

The drilling target for end 2011 is 7,000 to 8,000 metres, with the objective of proving resources of a minimum of five million tonnes. Three geologists and 35 assistants and operatives are currently in the field, working towards these goals.

“We want to have completed the pre-feasibility study by the end of 2011, by which time we will expect to be producing zinc calcine,” says Doug Taylor, director of Business Development and also a mining engineer with RCR. “We are looking to produce LMEgrade zinc in another 12 to 18 months.”

The topography of south-east Turkey is challenging. The collision between the Anatolian and Arabian tectonic plates has caused massive folding; in some parts, the zinc mineralised seam runs vertically or is even folded over itself. The area is slashed with steep valleys, but these are mere physical challenges. Turkey’s mineral wealth in the south-east has not been effectively exploited because of a long period of political turmoil. The Kurdish population has had many of its grievances answered and the area is much more stable. This has provided the opportunity to RCR to develop the resources, in partnership with the people on the ground.

“We have faced tough times recently—the recession forced us to reconsider our investment strategy,” says Dr Toper. Yet RCR has still been successful recently raising additional capital of $6 million in Canada. RCR’s exploration and development schedule is remaining aggressively on target and the mineral resources of south-east Turkey are soon to come on-stream. www.afrasia. com.tr and www.redcrescentresources.com

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Winning theuphillba

Mining is often about an underground world of tunnels towards the ce At Pike River Coal, however, the challenge of New Zealand’s geology h tunnelling uphill and a reliance on water. New CEO Peter Whittall expla

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g

attle

ntre of the earth. has resulted in ains all to Andrew Pelis

Pike River Coal

T

he recent earthquake in Christchurch, New Zealand reveals the geological complexity of the South Island. For Pike River Coal, however, while earth tremors are no major problem, geology has proved to be an uphill struggle.

For the past five years Pike River Coal has worked on methods to extract a large and rich seam of coal. Despite the attraction of coal prices, the challenges thrown at the company by nature would have been enough to make many people quit.

Not so Peter Whittall, who became the company’s first ever employee when he joined the start-up business in 2005. Now about to take over the mantle as CEO, Whittall remains hugely optimistic for the prospects of PRC, despite a number of initial setbacks.

“We are focused purely on coal here and are a single asset start-up company. We operate a premium hard coking underground mine which is located about 50 kilometres north east of Greymouth, on the west coast of New Zealand’s South Island.”

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When Whittall joined the business in 2005, it was a subsidiary of New Zealand Oil and Gas (who still retain shareholdings today). He worked as mine and general manager for the ensuing five and a half years, during which time all kinds of surveys and tests were undertaken to establish whether the area could be mined and how.

“The coal mine is located within the Paparoa Range, up the Grey Valley, which is renowned for coal and gold mining. The terrain is exceptionally challenging and the coal seam itself has been upthrust and sits some 600 metres above sea level and within 100 metres of the surface.

“The seam runs from a depth of 100 metres up to 700 metres below the mountain range with outcrops on the western escarpment which are impossible to mine; we have had to access the mine from the east, some 10 kilometres up a steep river valley and to do that we needed to build a winding road on the edge of a hillside which took a year to complete.”

To compound the technical challenges, the road could not be built the whole way to the seam and finishes some two kilometres away, while the seam sits to the west of a major 1,000 metre geological fault. Whittall and his team have had to tunnel uphill through rock on a one in eleven grade for the whole two kilometres.

“If that wasn’t enough, the whole site sits within an area of stunning natural beauty (including ancient forests), owned by the Department of Conservation (DOC) and every step of the way we have had to work very closely with them to ensure that we complied with all their requests,” he says.

“We operate with huge restrictions environmentally on issues like water discharges and construction and when we built the road we had to obtain a permit for every tree we removed above a certain size. New Zealand Oil and Gas first obtained their lease for the land in 1986 and for the first ten years very little got done as it was deemed too difficult.

The watershed came in 1996 when NZOG decided to take on the challenge and began consent procedures, taking them eight years to obtain all of the relevant consenting permits.”

At that point Whittall joined the company and worked closely with DOC to put the pre-planning work into action. Such were PRC’s efforts that in 2008 they received an award in recognition of their environmental consideration for the construction

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of the mine, the first time the DOC had ever extolled such a distinction on a mining company.

“The environment is something we will always give huge consideration to and whenever we run induction courses for new employees one of the first things we do is to inform them of their environmental responsibilities,” Whittall affirms.

Progress on the underground tunnelling to the coal seam has been slow and has met setbacks on more than one occasion. An initial outlay on German machinery proved a false dawn as the equipment, which had been modified in Australia, slowed down operations. That particular problem has now been largely resolved with the purchase of new machinery.

The project also saw a collapse of the lower portion of the ventilation shaft during construction and Whittall says that served to remind everyone that the area is comprised of very faulted ground.

“It has taken nearly two years to develop the

underground roadways but productivity is increasing and will make another step change with delivery of a second ABM20 continuous miner in January 2011. Establishing a good lead of development roadways over extraction is always a challenge during the early stages of a mine’s life.”

Financing to this point has been successful, and was given a large helping hand when the company went public both in Australia and New Zealand back in 2007, as Whittall explains. “Our initial flotation raised roughly $85 million and we have subsequently been back to the market in subsequent years and, through a number of rights issues and a bond placement, we have managed to raise a further $195 million. It is very fair to say that the equity market has been hugely supportive of Pike River Coal.”

Much of the support and optimism in the company stems from the price of coal and demand for this commodity as part of the steel-

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Hard Metal Industries HMI proudly supplies high quality consumables specifically designed for underground coal mining, ensuring companies including Pike River Coal are getting ultimate results every time.

HMI manufacturers and supplies Tungsten carbide and PCD Drilling tools for the tunnelling, mining, trenching and exploration industries. From drilling tools, replaceable tungsten tipped wear tools and wear protection solutions, HMI strives to meet your needs.

making process. Despite the project costing around NZ$300 million so far, Whittall says that the method of mining will be very cost effective given the rising price of coal. “We are using a hydro-mining technique to extract and transport the coal the two kilometres out of the mine and a further eight kilometres down the valley to the Coal Preparation Plant. While this method (that shoots jets of water at a rate of 9,000 litres per minute at the coal) is not as productive as long wall mining, it is in many ways more flexible and well suited to

West Coast conditions. It is also much safer as it reduces the risk of fire, for example.

“We expect to eventually produce a million tonnes a year which at forecast market prices will give us a cash positive balance sheet in the near future,” he continues. “We recently completed the first underground hydro-tunnels and expect to ramp up operations over the next few months, reaching full production rates in the next six months. The mine life at present is around 20 years but we know there is lots more coal beneath our feet, so we hope to begin drilling and exploring the potential in 2011.”

Having overcome so many obstacles already, Whittall is now looking at a bright future for Pike River Coal. “Our coal is only used for steel-making and we already have contracts in place with Indian customers and Japanese mills. Demand remains high and it really is a boom-time for the whole industry.” www.pike.co.nz

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here’s nothing very conventional about the way the Indian biopharmaceutical company Biocon has developed.

Even its original structure—a joint venture in 1978 between the Indian entrepreneur, Ms Kiran MazumdarShaw, barely out of university at the time—and the Irish Biocon Biochemicals company is hardly textbook. But it did mark the start of a bio-revolution in India with Biocon evolving over the years from an enzyme-manufacturing company into a fully integrated biopharmaceutical enterprise.

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The new buzz in the pharma industry is how best to capi rapid demand from newly a markets. As Jeff Daniels lea already well ensconced

Biocon

ging

aceutical italise on the affluent emerging arns, Biocon is

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The full impact that Biocon was to have on India had to wait for some time. In the meantime, ownership of Biocon Biochemicals in Ireland, first passed to Unilever, where for a while it was incorporated into Quest International. Later still, in 1998, when Unilever sold a package of businesses in its specialty chemicals division— including Quest—to ICI, an agreement was made for Unilever to sell its shareholding in Biocon to Indian promoters, thus bringing Biocon home as an independent entity.

After six years of private ownership, Biocon created a storm in the stock market when it floated a third of the stock in March 2004. On day one of its hugely oversubscribed launch, markets closed valuing Biocon at $1.11 billion—only the second time in history that an Indian company crossed the $1 billion mark on the first day of trading.

Today, Biocon is a fully integrated healthcare company that delivers innovative biopharmaceutical solutions. Through separate subsidiary businesses that have been created to specialise on specific roles, Biocon’s business structure enables it to span the entire drug value chain, from pre-clinical discovery to clinical development and then on to commercialisation. Together, these interests provide multiple revenue streams which balance risk, encourage innovation and deliver products with accelerated growth.

Biocon capitalises on India’s globally competitive cost base coupled with its own exceptional scientific people resources, pushing through its own in-house R&D programmes, while also providing custom and clinical research services to international pharmaceutical and biotechnology majors.

Biocon has rapidly developed a robust drug pipeline, led by monoclonal antibodies and several other molecules at exciting stages in the biopharmaceutical value chain. With the successful commercial launch of its first anti-cancer drug and several other promising discovery partnerships in progress, Biocon strongly advocates the development of affordable medicines.

Syngene is Biocon’s custom research organisation, responsible for pre-clinical discoveries of new pharmaceutical products. It aims to provide high value development services, from target identification and validation to small molecule and library synthesis. With its reputation for meticulous

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Asahi Kasei Group We

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innovation and advances based in science and the human intellect, will contribute to human life and human livelihood. We will create new value, thinking and working in unison with the customer, from the perspective of the customer. We will respect the employee as an individual, and value teamwork and worthy endeavor.

We will contribute to our shareholders, and to all whom we work with and serve, as an international, high earnings enterprise. We will strive for harmony with the natural environment and ensure the safety of our products, operations and activities. We will progress in concert with society, and honor the laws and standards of society as a good corporate citizen.

Neopharma to manufacture and market a range of biopharmaceuticals specifically for countries in the Gulf Cooperation Council.

In 2008, Biocon acquired a 78 per cent stake in German pharmaceutical company AxiCorp at a cost of €30 million. AxiCorp markets paralleldistributed EU pharmaceuticals as well as its own generic brand ‘Axcount’ in a unique business approach which has brought significant cost savings to German health providers and patients in the under-patent pharmaceuticals market, as well as in the off-patent market. Through the AxiCorp acquisition, Biocon has access to a wide range of pharmaceuticals including generics, biosimilars, biologics and innovative pharmaceutical products in Germany and Europe.

At other times, Biocon has elected to enter strategic partnerships, both with high tech ‘startup’ companies or long established names in order

“Biocon is a fully integrated healthcare company that delivers innovative biopharmaceutical solutions” protection of intellectual property, it provides customised solutions in the areas of synthetic chemistry and molecular biology to pharmaceutical and biotechnology majors worldwide.

Clinigene covers the middle ground, specialising in phase I-IV clinical trials and studies, using well-characterised clinical databases in diabetes, oncology, lipidemia and cardiovascular diseases at Biocon’s state-of-the-art Bioavailability and Bioequivalence Centre—accredited by both the College of American Pathologists and NABL (National Accreditation Board for Testing and Calibration Laboratories).

Biocon handles the commercialisation of products, for which it has gained a solid reputation with a formidable portfolio of biopharmaceuticals, led by Biocon’s cholesterol lowering star Statins. The ability to commercialise insulin, immunosuppressants and a range of biogenerics demonstrates highly advanced process development and manufacturing expertise.

In recent years, Biocon has spread its wings internationally, starting in 2007 with a joint venture with Abu Dhabi-based pharmaceutical company

to exploit potentially rewarding new products. The list is far too long to itemise here but the following selection will provide a flavour of the variety of interests Biocon is developing.

Biocon’s relationship with Amylin Pharmaceuticals, for example, is to jointly develop, commercialize and manufacture a novel peptide therapeutic for the treatment of diabetes.

Sapient Discovery is an established leader in structure-guided drug discovery with a number of proprietary algorithms and capabilities for efficient protein structure based drug discovery. Sapient is working with Biocon and using its proprietary Genes-to-Leads, Fragments-to-Leads and X-ray crystallography technologies which are claimed to provide dramatic reductions in the time and costs associated with compound synthesis and screening.

Sometimes these partnerships are created to better exploit generic drugs while at others, as is the case with US start-up company Iatrica, the collaboration is to co-develop an exclusive new class of immune-conjugates for targeted immunotherapy of cancers and infectious diseases.

Iatrica is based in Baltimore and uses technology

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Pall Life Sciences Pall Life Sciences is the leading global provider of filtration, purification and separation products and technologies to the biopharmaceuticals market.

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supported by extensive protocols and technical reports, an industry-leading scientific and technical staff, and worldwide offices. Biocon utilizes Pall’s Centre of Excellence in Bangalore, India. The Centre drives process optimization innovations and houses a state-of-the-art proteomics laboratory, validation laboratory and a training facility to support Indian and regional customers.

developed at Johns Hopkins University.

Alternatively, Biocon has chosen to use licensed technology to further its product portfolio as was the case when Biocon acquired the rights to manufacture Abraxis BioScience’s Abraxane approach to the treatment of breast cancer. Under the terms of the agreement, Biocon will have the right to market the drug throughout the Gulf States and the Indian sub-continent.

To demonstrate its versatility and flexibility, you need look no further than the partnership it has with DuPont, which is working with Syngene on the development of new crop protection products.

Biocon also works closely with a number of universities. For example, in conjunction with the Indian School of Business (ISB) the Biocon Cell for Innovation Management has been launched to promote innovation in business. The Cell, set up at the cost of 10 million rupees, operates under the aegis of the Centre for Leadership, Innovation and Change at the ISB, and helps organisations find answers to questions such as the gaps in a company’s ability to innovate, assessing the required understanding to manage and mitigate risks associated with innovation and how to produce high value, high quality, strategic innovation at low cost.

To capitalise on the interest in biotechnology and biosciences research at the Deakin University of Australia, Biocon has helped establish the Deakin Research Institute in Bangalore and a joint development of a mammalian cell bio-processing facility at Geelong in the Australian state of Victoria.

In an industry dominated by American and European giants, Biocon has nevertheless carved out a significant role for itself, ranking among the top 20 global biotechnology companies—making it, at one stage, the seventh largest biotech employer in the world.

Biocon’s workforce presently totals around 4,750—expected to rise to 5,000 in the next quarter—of which, at the last analysis, 84 per cent were university graduates and more than half of these held postgraduate degrees or PhDs. With the average age of employees at just 29, the company is alive with energy and youthful enthusiasm.

We started this profile of Biocon by remarking on its unconventionality. Perhaps the most striking example of this is the founder of the business herself. Born and educated in Bangalore—still the

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Millipore Millipore is a Life Science leader providing cuttingedge technologies, tools and services for bioscience research and biopharmaceutical manufacturing. As a strategic partner, we collaborate with customers to confront the world’s challenging human health issues. From research to development to production, our scientific expertise and innovative solutions help customers tackle their most complex problems and achieve their goals. Millipore Corporation is an S&P 500 company with more than 6,000 employees worldwide.

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degrees from universities, leadership awards from business publications and numerous recognitions from various august business institutions.

Despite the enormous workload of her role as chairman and managing director, the open door policy of Mazumdar-Shaw still remains—whether for the key management team that surrounds her or for the most recent campus recruit—a highly refreshing attitude. A commitment to continuous training programmes for internees and permanent staff alike brings out the best in her people from the very beginning of their employment at Biocon.

And headaches aplenty there certainly have been in recent years for the chairman. As MazumdarShaw reported at the most recent annual general

“Collaboration is proving to be the most prudent and effective way to boost productivity, cut time to market and sustain growth” home of Biocon—Kiran Mazumdar-Shaw graduated in 1973 and studied beer brewing at the Ballarat Institute of Advanced Education in Australia before joining Carlton & United Beverages, originators of the famous Fosters brand.

In 1978, Mazumdar-Shaw moved to Ireland and joined Biocon Biochemicals as a trainee manager. Within a year she had persuaded the Irish management to help her establish Biocon in India with the initial goal of extracting an enzyme from papaya. At that time, biotechnology was a completely unheard of science in India and not surprisingly, her first application for finance was turned down by banks.

Nevertheless, over the years, the company grew under her stewardship and is today the biggest biopharmaceutical firm in India. When the business was floated in 2004, the issue was oversubscribed by over 30 times! Mazumdar-Shaw held onto 40 per cent of the stock, making her one of India’s richest women with an estimated worth of $480 million.

Over the years, her inspirational leadership has won her countless awards and accolades. Barely four years after the start of her business career, she won Gold for Best Woman Entrepreneur, awarded by the Institute of Marketing Management. Since then she has been showered with honorary

meeting, 2010 has been a very challenging year for the global pharmaceutical industry. Sales have declined, research productivity has fallen off while development costs have spiralled at the same time that pricing pressures from national healthcare systems have squeezed margins.

Growth has been hampered and the dynamics of the industry changed.

But when markets experience churn, new opportunities often emerge. To take advantage of unfolding possibilities, companies need to have in place business strategies that are open to change. In this regard, Biocon has demonstrated it has developed a business model that is both flexible and risk balanced.

Mazumdar-Shaw believes that the dependence on blockbuster drugs in niche developed markets is “suboptimal, expensive and economically unsustainable.” Instead she considers that the industry’s next growth story will come from emerging markets, through synergistic alliances and a diversified portfolio weighted towards generics and biosimilars.

Nevertheless, innovation is expected to continue delivering exciting, new opportunities.

She advocates risk sharing models based on co-development of novel drugs. She argues that research services capable of spanning discovery,

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Chemetall Chemetall

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INVITROGEN INVITROGEN, part of Life Technologies, believes in the motto “Shaping Discovery, Improving Life”.

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Life Technologies, committed to improving the human condition, is a preferred partner offering optimized and scalable solutions to Biocon, the global healthcare company, in their quest to deliver affordable innovations.

considers that many companies will be forced to view outsourcing or contract services as a means of achieving the advances they need. As the complexity and scope of Bicon’s own R&D increases, this will be the perfect foil for the other divisions, delivering meaningful synergies. Finally, Mazumdar-Shaw predicts rewards from a strong market development focus on India and emerging markets.

And there is no shortage of emerging markets.

As well as India itself, countries such as China, Brazil, Mexico, South Korea, Turkey and Russia are all home to a growing middle class with rising disposable income and with that, the seemingly irresistible onset of ‘affluent’ diseases. These markets are increasingly investing in healthcare and health insurance. Together, these nations will generate exponential growth for biopharmaceutical sales in years to come.

Whether wanting to revive the research base, bolster the product pipeline or make inroads into new markets, biopharmaceutical companies such as Biocon are increasingly recognising the strength of, and need for, partnerships. Through licensing of advanced discovery programmes, marketing alliances and strategic research collaborations, it is possible to share the risks and costs associated with drug development by

“Biocon capitalises on India’s globally competitive cost base coupled with its own exceptional scientific people resources” preclinical and clinical development will win out thanks to their ability to contain R&D costs. If this is the case, Biocon is uniquely positioned to capitalise on its superior technology base, proven research teams and highly productive manufacturing.

Biocon has identified four strong and differentiated growth drivers. Firstly, it expects demand for its portfolio of biosimilar insulin and insulin analogs and the basket of biosimilar monoclonal antibodies to continue strongly, thanks to the prevailing health of the Western world and the way it is being copied in the East. It also sees considerable opportunities for customised research services as delivered by Syngene and the high productivity clinical research delivered by Clinigene. With escalating R&D costs and the long path to new medicine, Biocon

leveraging complementary skills and combining capabilities along the drug value chain. In Biocon’s opinion, collaboration is proving to be the most prudent and effective way to boost productivity, cut time to market and sustain growth.

Biocon is among those farsighted biopharmaceutical companies that have been mindful of change, agile to adapt and intuitive about opportunities for growth. Its strategic location in the heart of a ‘pharmerging’ market (industry jargon for an emerging pharmaceutical market) has enabled it to fully capitalise on its low cost base.

Long before it became a widely held strategic need, Biocon has advocated affordable innovation.

It invested in world class research outsourcing capabilities, US FDA compliant bio-manufacturing facilities and a self-financed R&D pipeline while the

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“In an industry dominated by American and European giants, Biocon has nevertheless carved out a significant role for itself, ranking among the top 20 global biotechnology companies� global industry was still grappling with strategies to mitigate escalating drug development costs. A forward looking biosimilar strategy was already in place prior to the industry realising its potential to sustain expensive discovery and become a powerful source of revenue. So today, as the industry restructures to seize opportunities, Biocon could perhaps lead the way as a model, risk balanced company well positioned to harness the biopharmaceutical emergence.

Patents for first generation biological products will begin to expire from 2014 onwards, opening the door for biosimiliars which have been estimated to be worth $19 billion. With products such as Insugen Basalog and BioMAb, Biocon has already demonstrated it has the technical and operational expertise necessary to take innovative and

affordable insulin and MAb products to the market.

The proof of the pudding is in the eating and in July this year the company reported 52 per cent higher net profit year-on-year at 723 million rupees for the first quarter ended June 2010 against 475 million rupees during the corresponding period last year. Among insulins, immunosuppressants, statins and branded formulations, representing the core of the business, net sales increased by 37 per cent.

Biocon has also taken a number of steps closer to its ambitious global aspirations. In Europe, the EU regulator has cleared the phase III clinical trials of its biosimilar insulin and the company will soon begin patient recruitment.

In the US, another important milestone has been reached with the revolutionary oral insulin

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Biocon

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pill programme, IN105, entering phase I trials for Type-1 diabetes. The company plans to commercialise this molecule through a global partner and will begin licensing discussions towards the end of this year when it has more detailed data from the trials.

To demonstrate the balanced structure within Biocon, despite its emphasis on generics and biosimilars, in the latest reported quarter, its branded drugs for diabetes, cancer, renal disorders and cardiology also did well, notching up a 28 per cent sales growth year-on-year.

Finally, in September, two new divisions were launched, to market a range of dermacare, immunotherapy, pain relief, anti-infectives and comprehensive care products aimed at hospital intensive care units; yet more evidence of Biocon’s unconventional ability to adapt to new opportunities. www.biocon.com

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