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Interview

with Grahame McCaig, Managing Director, Aveng Grinaker-LTA

29.03.2012 / Energyboardroom

You took over as new managing director from Mr. Erasmus in August 2011. Can you tell us more about the path that led you to this new position?

I joined Grinaker as a bursar in 1985 and worked for the Company after graduating. In 1994 I moved to the Middle East but when Aveng Grinaker-LTA asked me to return last year as Managing Director, it was an easy decision to make. Back then, there was a significant requirement for South African talent in Dubai. Particularly in the Middle East, you need to employ your own labor which is usually brought in from the Subcontinent. South Africans traditionally ranked very highly on productivity, man hours, etc. The Europeans, for example, moved away from engaging their own labor due to labor union issues. Instead, they moved towards labor-only subcontracting. In my view, there was an inability from staff from Europe –and the UK in particular- to work in the environment and understand how to put people to work in Dubai.

During the time I was there, we went through two busts, one in 1999 and one in 2008. However, the boom from 2002 to 2007 was just phenomenal. The amount of construction was simply unbelievable. These were not your average 4.5 storey buildings; these were megaprojects. The levels of growth that we were experiencing demanded that we employed new management. South Africa was a ripe picking ground for exceptional management talent and during this period there was an immense amount of recruiting done out of South Africa. This resulted in a huge brain drain from South Africa. As a result, South Africa has lost a lot of its skills which have been transferred elsewhere. The world has certainly changed since 2008; however it remains difficult to attract the best of these people back to South Africa.

What would you say have been some of the key lessons you took away from Dubai?

I learned a great deal during my time in the Middle East, but there were two particularly most important aspects of working in Dubai which I have brought back to South Africa with me.

The first is the first is the absolute need to develop successful multi-cultural management teams. The Dubai environment required a lot of work with multicultural management teams: Indian, Pakistani, Australian, English, Irish, Dutch, French, German, etc. Coming back here, this is of real value because, despite being mostly from the same country, we take on people from many different cultures and backgrounds.

The second important aspect was the development of an industry collaborative approach towards improving the overall standards of Health and Safety which apply to the construction sector. I am the current chairman of BuildSafe South Africa, which is an initiative that promotes and encourages the sharing of construction safety information with the view to improving the overall standard of Health and Safety in the industry. It is a concept which we successfully developed and rolled out in Dubai and which I am pleased to report is having a major impact on the South African construction industry. During that boom period in Dubai, we were bringing in people by the hundreds of thousands and it was very important to maintain high standards.

Is such rapid growth even manageable?
Fortunately we had very good systems for financial reporting, commercial reporting, etc. You can grow or shrink an organization as long as you have robust systems in place.

It is true that there were big issues, for example our corporate culture was diluted by the massive influx of new people. As an example, our average length of service was around 10 to 12 years in 2002 but by 2005 it was less than 6 months.

How do the Dubai market characteristics compare to the South African market today?

The South African market at present mirrors the existing Dubai market very closely. The impact of the 2008 global economic crisis on South Africa was somewhat delayed because of the construction boom centered around the 2010 Soccer World Cup, however things have definitely changed here since the middle of 2010. The volume of new construction work has reduced significantly resulting in a very competitive environment where it is not uncommon to see 8 to 10 tenderers fighting for the same contract.

Can you elaborate on the capabilities of Aveng Grinaker-LTA when it comes to its oil and gas projects?

The oil and gas sector is very important to us and forms a very large portion of our Mechanical & Electrical (M&E) capability. The sector contributes a substantial portion to our annual turnover. The work we do in this area is quite diverse and consists of both new build projects, as well as shutdown work.

At Vanderbijlpark, we have a massive pipespooling facility where we do a lot of the offsite work. I think in construction in general, but specifically in the Oil & Gas sector, we are witnessing large scale skills shortages. As I understand it, over time, South Africa has closed many of the technical training schools and colleges which has significantly reduced the number of individuals being exposed to and developing a trade skill. There is a serious shortage of trade skills in South Africa. As a participant in this sector, we have to address the skills shortage head-on and have therefore just opened a welding school at Vanderbijlpark, where we effectively offer an apprenticeship scheme compliant with the national standards. This move away from encouraging and promoting people to gain a technical qualification is not limited to South Africa and the lack of trade expertise is manifesting itself as a mounting global issue. This lack of technical expertise is seriously hurting our Industry and impacting our ability to deliver projects in a consistent manner

While you can invest a lot of resources in such training facilities, it is not unlikely that much of that talent is being acquired by the competition later on. How can you justify such investment?

By training our own people and ensuring that they are proficient, we achieve higher productivity and efficiency, as well as fewer issues in terms of safety and quality. There is no doubt that by investing in this welding school, we are actually reducing the costs that are being incurred on the job.

We accept the fact that a portion of the people we train will go and work for someone else, but at the end of the day, people with certificates from the Aveng Grinaker-LTA welding school will be regarded as quality welders in the industry which is good for the company and good for the industry as well. We believe this is the right thing to do. Just like I did, people will leave and then return to the company, it is something we need to accept.

Sasol’s Synfuels MD was also present at the opening ceremony of the welding school. Has the school put Aveng Grinaker-LTA in a better position to tap into the R 40 billion that Sasol plans to spend on projects in the coming 3 years?

In terms of volume and turnover, we are probably the biggest construction company working for Sastech, Sasol’s project management arm. We have very good relationships with Synfuels and Sasol in general. I do believe we would be very well positioned to get some of that work.

Fluor’s Mark Flower foresaw a lot of growth coming from the new fuels specifications at the refineries. Do you also see this as a big opportunity for Aveng Grinaker-LTA?

The clean fuels specifications are a big opportunity, much like energy. We are building our capabilities to be better placed to participate in this area. We already have these competences within Aveng Water, and aim to build on this model.

How do you now want to be perceived by your customers, most notably across the continent? Are we seeing an African company, a South African company, …?

We will always be a South Africa based company. It is an interesting question however, as I often wonder which people are best to use when going further into Africa. Today, you will find much more recruiting of Middle Eastern, Indian, and Filipino nationalities to work in Africa.

What are the key priorities you now see for the company, going forward?

We are looking to focus more on our operational delivery and ensure that we are cost-effective, because of the environment we operate in. We need to ensure that we deliver in the most efficient way possible.

Last year, Aveng Grinaker-LTA was already chosen the best construction company in the industry, winning the Golden Arrow award. What is left to achieve in the next years?

I have always believed that the true measure of success is to be able to offer a wide variety of services while delivering excellence all the time. Generating repeat work is another very important measure of success.

Would you have a final message for the international readers and South African stakeholders?

At the end of the day, South Africa is a wonderful country with a lot of potential. There are immense opportunities for foreign investment in the country and I would encourage any of the international readers to consider the wealth of opportunities which South Africa offers. Delivery of the World Cup has proven the ability of local industry to deliver excellence in complex infrastructure projects and therefore when they do invest they can do so with confidence that the local construction industry will deliver.

South African companies have and continue to export their capabilities beyond our borders both into Africa and indeed internationally.

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