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Interview

with Michael Graham Els, Chief Executive Officer, WACO Africa

01.02.2012 / Energyboardroom

Having founded the construction companies Kerr Projects and Flagprop before joining WACO Africa showcase you as a successful entrepreneur in the industry. Why this enormous switch from entrepreneurship to join WACO Africa in 2010?

I had achieved everything I set out to do and it was time for a new challenge. Simultaneously, WACO Africa needed someone with a sense of entrepreneurship to take the company to the next level. Our challenge is to expand into Africa and South America and WACO Africa needed someone who had the experience and vision to achieve this goal.

A new CEO often means a new wind, a new push in a certain direction. What were some of the key decisions that you had to take in these first two years?

We have restructured the whole group to better position ourselves to take advantage of the various growth opportunities. The company at that time was not as successful as it could have been. We had come off the heights of the construction boom and with the downturn resulting from the GFC we needed to realign ourselves with the new reality facing us.

The reality was that the workflow on the construction side had reduced, while industrial maintenance and petrochemical remained steady. Despite this we still saw industrial companies delaying their maintenance for as long as possible. It was our aim, together with these companies, to formulate how best to approach their maintenance agenda. SGB-Cape currently works on both plants of Sasol in South Africa, the Engen refinery and various power stations for Eskom, to name but a few. At the same time, we are also involved in mega projects in the new build niche.

Industry reports have indeed shown that the sector is coming off a high base. Are we seeing the end of a golden era in South Africa?

We have caught the tail-end of the downturn in Europe and the US, but have not been as badly affected as them. Nonetheless, this has made us more conscious of being cost-effective, and consequently more successful.

Overall, we see the sector picking up again albeit slowly. Construction is picking up with mega projects being planned. In addition there has been much talk about the infra-structure spend. Some of the larger institutions, with large cash reserves also appear to be investing in fixed property which is obviously a good sign for the Waco group.

What are some of these larger projects that are planned now?
The Heritage Mall is under construction in the West of Johannesburg, which is being developed by Sasol for around R 1 bn. Another R 1 bn project is the Portside development, which will be a high-rise development on the foreshore in Cape Town’s CBD. We also see numerous buildings going up around the Sandton node. In Pretoria, the Menlyn Maine project is booming, representing a development of around 500,000 m2 with the first 4 buildings already completed. Another mega project, Steyn City, is located North of Johannesburg, where we anticipate around 12,000 houses, office blocks, golf courses and shopping centres to be erected. Simultaneously, we will see infrastructure developing further too.

The industrial maintenance side is now flourishing following a very quiet 2 years during which most companies froze their budgets. Engen had a big shutdown recently, while Chevron is going into a shutdown now. Sasol undertook major maintenance last year, while another maintenance period has been registered. Eskom are also trying to have the majority of their maintenance completed prior to the winter demand peak.

Looking at the offshore and repair side then, the industry has seen SGB-Cape being highly involved in the Scarabeo 7 project in Cape Town, the world’s largest semi-submersible oil drilling rig. This was a year before you arrived. Today, is this a significant project in the track record you present to your customers?

We can indeed use this and numerous others since then as projects to showcase our work. At the moment, the ports of Saldanha Bay, Cape Town and Coega are involved in rig maintenance and repair work. Coega is better suited to handling deepwater rigs, while Cape Town has also seen an increase in work. We also see oil rigs coming into Walvis Bay and Namibia in the future, where we are also based.

To speed up the turnaround time we have devised an access system on the quayside which allows us to save up to 6 days.

Several of our previous interviewees, such as Salvo Cutino and Chris Sparg of Dormac saw a lot of potential in the capabilities we find in these ports. However, a big limitation appeared to persist at an infrastructure level. What still needs to be improved there?

I think it is the perceptions that need to be improved. We are dealing with the legacy of the past and are competing with international ports that are offering cut rates on berthing. Our skills are as good as any country in the world and the finished product is on par with competing ports. The systems and products that SGB-Cape has designed over the past 30 odd years are of world-class standard. Special access platforms, special clamping mechanisms to go on round structures, fixing systems etc. are prime examples of the expertise and experience that we have on offer.

When it comes to offshore rig repair and maintenance, does South Africa already match the level of global hubs such as Singapore and Aberdeen?

I think that we are able to match any yard worldwide, although we might be lacking in terms of specialized facilities such as a dry dock which can accommodate oil rigs. I think the success of major projects completed in some of our ports (Cape Town, Saldanha Bay, Coega) speak for themselves.

In terms of access scaffolding services we supply, I think we are able to supply a world class service, and as such have offshore maintenance contracts on rigs and pipe laying vessels around the world. South Africa is well located in relation to rigs from both the West and East Coasts of Africa. Further to this our climatic conditions are better than certain of our competitors.

Moving back to the construction industry as a whole, we have seen significant growth rates for the sector in South Africa over the past decade. How does this compare to the rest of Africa for which you are also responsible?

Africa needs to be looked at in various components. African countries are at various stages of development, and we cannot say that one size fits all. We are geared towards high-tech construction where the turnaround times, quality and safety are important. This mainly applies to the more developed nations which for us includes most of the faster developing African countries.

Several South African players position themselves as African, rather than South African companies. Do you see a certain advantage over other international players when dealing with the African continent?

We have been selling products and contracting throughout Africa for the last 60 years. This experience not only provides us with a substantial advantage, but also makes us aware of the potential pitfalls. We have an understanding of how things operate on the African Continent much better than some of the other international companies. Our location in terms of accessibility is certainly better and our products are definitely more geared towards the needs of these markets.

Both Europe and the US have moved into high-tech less labour-intensive equipment. Our equipment is more robust, and better suited for the application.

The disadvantage is that we as South Africans have become complacent. As we are located on the African continent, we have somehow come to believe that we are the African experts while this may not necessarily always be true. This is why we have set up an African division for each of SGB-Cape and Form-Scaff that look at various sectors of the African markets, rather than grouping Africa under one common denominator.

What are some of the African pitfalls you would warn other managers for?

Transportation remains a big issue as roads and infrastructure hamper delivery. Language still remains a barrier across the continent. Business ethics in certain countries are also a cause for concern.

While you can now rely on a strong reputation when moving into these markets, you still need to build relationships with major companies, including some of the local parastatals. In your view, how challenging is it to build up such relationships at the local level?

This is a process that takes time. Nothing is built overnight and you need to align with the right people while delivering an excellent service. In Africa, we have been operating as SGB-Cape for 63 years and as Form-Scaff for almost 50 years. Over this period, we have been building these long-term relationships.

As you mentioned, you are not alone in these markets and partner up with leading international companies. What are some of the elements you look for in such partners?

We look for like-minded people that carry the same ideas, goals and ethics as we do. We particularly look for partners that are in it for the long haul, as an example our Namibian partners have been with us for over 25 years.

Is the partnership-model the way to go forward in Africa?

We do not always partner and sometimes undertake the venture on our own. Then again, in some countries you are required to partner with one of the local companies.

The African East Coast and developments along the shores of Mozambique are quite a hot topic amongst our South African interviewees. Is this market ready to develop, or is it still going to take some time?

The finds off Mozambique are reportedly 4 to 5 times larger than those of the North Sea. We believe the opportunities will be as big as those in Angola. This is however dependant on how the government manages development and with whom they partner. The plans for Pemba are impressive, while we see the driving force being the gas related industries many associated services will flourish from in the area.

How do you see these developments reflecting on WACO Africa?

We are already opening up a branch in Pemba and are the frontrunners for various other projects in the area. We are also moving into the Tete province, where we are supporting development of the coal mines.

Madagascar is another market where we have been ramping up our business. Last year alone, we successfully completed a R 120m project on the Ambatovy Project, a cobalt & nickel mine at Tamatave.

Throughout these various projects, safety obviously remains a critical issue for the company. Nonetheless and in particular, seeing the fact that you operate in quite challenging areas, how do you ensure that the right safety standards are being respected?

We have got a dedicated safety department, where we employ in excess of 120 people. The way we enforce our safety policy is twofold, on the one hand we use a top-down approach, where we enforce what we want. On the other hand, there is the bottom-up approach, which results from having all our workers focused on their own safety and that of their fellow workers.

We have dropped our lost time injury frequency rate (LTIFR) down to 0.25. By way of example, we have been working at Hillside for 7 years, without any accidents. At the Grootvlei power station we, last year, achieved 3.5 million hours without any incidents. On average, we work around 1 million hours per month and average around 6 to 7 months per year without any injuries. This is an aspect we monitor closely through our safety department.

Our statistics are so precise that we can even identify which day, which time of the day and which body parts are more prone to injury, this all in an effort to improve our service and protect our staff.

We strive to have the highest safety standards throughout the company no matter where we operate. We have gone above and beyond what is required by most operators. We obviously want to protect our staff and ensure that our workers return home safe every day. From every board meeting to tool box talks, this is the first topic on our agenda. Safety is paramount to WACO Africa.

Is there still a difference between the South African companies and the international players in this respect?

We operate in Australia, Chile and throughout Africa. We also have a company based in the UK. From our experience as the Waco group, South Africa is as stringent as any country we work in.

Given the cyclical nature of the industry, you need to be able to attract large pools of talent within very short time frames. How flexible are you in this respect?

We have our core staff and use trained labour broking staff to quickly increase the number of workers onsite. Within a fairly short space of time, we have the flexibility to increase our labour force dramatically. We keep a record of all the skills that can be found throughout the countries in which we work, and in fact more often than not source the staff for the labour brokers.

To wrap up, you mentioned you have joined WACO Africa to lead the company through a turnaround stage. How pleased are you with the course you have taken?

I am enjoying the challenge and am pleased with what has been achieved so far. We see profits climbing while the quality and dedication of our staff is exceptional. The expansion plans are now commencing and we have been able to identify our growth opportunities. Of the 6 or 7 opportunities we identified 18 months ago, we are already in full swing on 4 of these. We have alchemy of growth agenda, and are ready to move on to the next level.

Do you have a final message to the international readers of the Oil and Gas Financial Journal, as well as the South African stakeholders?

South African companies and WACO Africa in particular, are committed to high quality performance and ethical operations, while providing an excellent service at a fair price. WACO Africa is committed to meeting our clients’ needs and with 60 years of industry experience, we are in there for the long haul.

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