When it comes to investment, Jay Ireland, CEO of GE Africa, knows how vital nurturing diversified partnerships can be. And with $2.5 billion of orders from sub-Saharan Africa over the past year alone, Ireland explains why he’s so confident about the future.
You’ve clearly had a stellar year, so, in terms of your African business, where do you see the growth prospects? Are there particular trends or sectors you focus on?
Fundamentally I’d look at it by businesses. We’re in healthcare, aviation, rail, power, water, and oil and gas. If you look at it by country, we’re very bullish and we see a lot of growth in Nigeria, Angola, Ghana and South Africa. In Nigeria and Angola, oil and gas is still a strong growth sector. We’re also in future looking at Mozambique.
In the other businesses – healthcare, rail, aviation, etc. – we focus on Kenya, South Africa, Ghana and some of the other African countries. We’re pretty pleased and very excited about all of our products across the 12 to 16 countries that we’re really focusing on. It’s been strong double-digit growth for us.
You have been with GE for 33 years. Would you say this is because GE is good at retaining talent, something similar to the Japanese system of lifetime employment, which is pretty rare these days?
I hope it’s talent! Yes, we’re probably better than most around I think. With the exception of some of the people we’ve hired, most of the GE people have been there for quite a while, which is helpful, from a culture standpoint. It also helps as you expand internationally as it allows you to navigate, to know where you stand and to understand the company. So it’s been good.
Is the strategy to look at it from a country rather than a sector level?
No, it’s both. One of the misperceptions about Africa, and I’m talking about sub-Saharan Africa, is to say that Africa is 46 countries or so. From a strategic standpoint, we prefer to break that down. The rail business right now has a lot of potential in four or five countries. Healthcare’s got a broader footprint, oil and gas is in the oil and gas countries. So we have a regional focus, which is broken down into business sectors.
I believe that in Africa you offer turnkey solutions, doing the feasibility study, organising the finance, supplying the equipment and so on. Is this specific to the region or is it GE strategy throughout emerging markets?
I would say it’s a strategy that we’re pursuing elsewhere but we probably use it the most here in Africa, only because credit facilitation around projects, financing, things like that, are probably, harder here than they are in the Middle East or China.
I wouldn’t say it’s turnkey, it’s basically bringing a solution. The easiest thing is to sell a piece of equipment and collect the money and leave but that’s not going to happen, so we’re going to be there for a long time, we’ve got maintenance agreements and then tied into that is making sure that these projects are viable for a long period of time; so we do focus around trying to get the whole thing completed.
People are talking about Africa’s $90bn infrastructure gap. What are the opportunities for a company like GE?
Electrification, rail, hospitals, more airlines, everything. We don’t do roads, we don’t do some of the basic civil work in infrastructure but a lot of the equipment that’s needed is what we do, so we think it’s a huge opportunity for us.
What’s stopping it, is it simply financing?
You’ve got a capacity issue here from the standpoint of people being able to get things done. It’s a combination of governments, it’s a combination of companies, it’s a combination of money, it’s a combination of engineering companies. Infrastructure projects take time and then they feed off each other.
Do you have a problem ‘selling Africa’ to management back home?
Actually, no. Our CEO, Jeff Immelt, has been here twice in the last 16 months and he’s all for Africa. We’re putting in almost $700m of investment in Nigeria, Angola, South Africa with manufacturing and service facilities. We’re putting our money where our mouth is from that standpoint.
From the standpoint of project risk, we all have risk parameters and we have to justify what we want to do from that standpoint but it’s not like a hard sell. I think the issue is on the financing side. If every project has to have a sovereign guarantee, you chew up the balance sheets of the countries and so they only have so much capacity that they can fund projects with. From GE’s perspective, the only issue we have is that we’re not going fast enough.
You’ve been in your position a little over two years. Has GE’s strategy or GE’s focus changed?
I would say in the two years that we’ve been here what’s changed is we’ve become much more knowledgeable about the markets and as a result we do things a little differently.
For example, we’re investing equity in some project development work that we’re doing in some countries. I would say that we’re also understanding the capability of where to put our resources. We’re focused on 16 or so countries so I would say we’ve also narrowed down our focus a little bit from that standpoint, but made it deeper.
What do you mean by taking on equity stakes in some projects?
Let’s say that it costs $10m to figure out if you can do a gas-fired power plant in a country; you have to do development work, you’ve got to do studies, you’ve got to ensure the fuel can get there, the power can get evacuated. We’re doing a wind project in Kenya – we have to do a two-year wind history to see what the capacity is. All that can cost $5m to $10m. We would put in a piece of that equity or fund it all or whatever rather than project developers coming in doing it.
In terms of power, do you act as consultants or work in tandem with governments?
It’s all of that to a degree but it all depends on how the country’s structured from the standpoint of their power segment. In Kenya, for example, we’re doing the wind project; one of the concerns was that all renewables have spikes – it’s not windy all the time and it’s not sunny all the time and so your grid has got to handle these spikes. So we’ll do a grid study and that’s all part of the package that we would provide to make sure that what we would bring on stream is conducive to what they need and how much they can handle.
We also do captive power with companies that need power directly for their operations and we are also even looking at power from biomass, things like that as well.
Africa has one of the lowest population densities in the world, which means that infrastructure development is extremely expensive per capita.
I think that’s misleading, because in the majority of the countries they’re heavily urbanised. You’ve got a tremendous amount of population that is moving to the urban centres such as Nairobi, Mombasa, Luanda, Lagos, Accra because of the economic opportunities in cities.When you consider infrastructure, there are two needs: one is a broader dissemination of roads, power, everything, going out to rural areas and the other, more importantly, is to make sure that you build up the infrastructure capability in urban areas.
Most of the urban areas are built for half to a third of the population that they currently have and, as a result, you have roads that are choked, shortage of electricity and the whole infrastructure struggles to keep up with the population growth. I think there’s a balance there that has to be struck.
One of the buzzwords at GE is localising solutions. Can you tell us what that really means?
Yes, it’s being local, it’s hiring local, it’s having people that live and work in the community as part of your team. For us, this means it’s hiring people, it’s training them, it’s having the ability to work with local partners and build local supply chains. So it’s all of that.
To me, a multinational coming into a country has certain responsibilities, obviously to provide appropriate priced products for services and products to the customer but, more importantly, it’s for us to come in and build a base that will feed into the economic growth and boosting local employment, not just bringing in a bunch of expats.
Also training those people, continuing to invest, building supply chains so you can get a multiplicative effect on the investment that we would do, so we can set companies up to make things and then they can use that to go sell them elsewhere and to build up their businesses.
The other aspect is working in the social area, continuing to focus on building skills, education, health, etc.
We’re here for the long term and that’s how we look at it. You have to make those long-term investments on the, I would say, soft side of things – which are people and local capability.
Because of what GE does, how easy or difficult is it to find engineers on the ground, to carry out the feasibility studies, etc.?
Depending on the countries, some more difficult than others. We’re going to set up a training facility and we’re going to put 200 to 300 people in these service and manufacturing facilities in Eastern Nigeria and in Angola. We’re looking at an innovation centre in South Africa focused around engineers.
GE is a US behemoth and it did to the 20th century what Google is doing to the 21st century. It remains one of the US’s largest conglomerates and one of the world’s most admired companies. Recently its revenues outside of the US exceeded its revenues in the US and its commitments in Africa have become central to its growth strategy. African Business spoke to Jay Ireland, President and CEO of GE Africa.
What we do now is to go to local schools and the diaspora to bring people back after they’ve been educated outside. But over the long haul, we have to build the base of training capability here in Africa.
You work is in many different countries. Is it a problem dealing with different regulatory environments?
I wouldn’t say it’s problematic, we’re used to that. What you need is consistency of the rules and regulations, that you know these will be the rules and regulations for the next five to 10 years.
We can figure out what’s the right way to comply with those rules and regulations but it’s if it keeps changing with every administration then it becomes problematic.
It is not really a problem yet. But that comes back to our focus on 16 countries as opposed to 46.
One of the things we look out for is the business environment. Can you get long-term and longer-term investors? Can you assume that the business environment is going to maintain itself over a period of time, that you’re not going to have to worry about how you do business?
In Kenya, which suffered during the election violence in 2008/8, and had changes of administrations, nothing changed from the standpoint of regulations or how you do business. That’s what you look for.