Africa Energy Market: ABB bullish on Southern African growth prospects despite commodity pullback

ABB Leonviljoen
ABB Southern Africa MD Leon Viljoen

The Southern African unit of global power and automation technology group ABB is optimistic that the region’s growth fundamentals remain intact despite the recent fall in oil and commodity prices. ABB Southern Africa MD Leon Viljoen reports that 17% of the company’s 2014 revenues arose from outside of South Africa and that the business is being increasingly structured to expand its presence in the African energy, industrial and mining markets south of the Equator.

The company has a footprint that already extends to Angola, Botswana,Democratic Republic of Congo, Kenya, Tanzania, Uganda, Namibia,Mozambique, Zimbabwe, Zambia and Mauritius, with South Africapositioned as the regional hub.

In parallel, ABB will seek to sustain a leading position within the less-vibrant, but still large, South African market, where electricity and transportation opportunities remain robust, with the group currently gearing up to fulfill a major traction-transformer contract placed on it by Bombardier Transportation.

The first 45 units will be manufactured in Geneva, Switzerland, with the 195 balance to be produced at a facility in Gauteng. In 2014, Transnet FreightRail singed a contract with Bombardier Transportation for the supply of 240 electric TRAXX Africa locomotives valued as around R13-billion.

There were sound prospects for addition railways workflow from South Africa and the region, while power sector prospects also remained strong, albeit weighed down somewhat by Eskom’s weak financial position.

In light of the dominance of State-owned companies in both sectors ABB Southern Africa has moved to sustain its level two black economic–empowerment status, despite the withdrawal of its long-time empowerment partner, Wipcapital. The 25.1% shareholding has been sold to the newly formed ABB Education Trust, an independently governed organisation dedicated to the education of young, previously disadvantaged women.

However, South Africa’s six-month platinum-sector strike, which was followed by a month-long wage strike in the metals sector, exacted a toll on the group’s 2014 performance.

Revenues declined by R1-billion to R4.9-billion when compared with 2013 and Viljoen indicates that he remains concerned about the outlook for the domestic economy, owing to ongoing electricity supply interruptions, which will constrain the output of existing businesses and lower investor appetite.

Nevertheless, ABB Southern Africa began 2015 with a steady order backlog of R3.5-billion, supported materially by non-South African business.

Viljoen is keeping close tabs on the impact on capital projects in the oil and gas sector as a result of the steep decline in prices, but says ABB is not yet experiencing a pull back from its African mining clients.

“Southern Africa is our focus for growth,” Viljoen says, adding that Africa has also emerged as a priority market for the global group, which reported revenues of $39.8-billion in 2014, net income of $2.6-billion and a global order backlog of $41.5-billion.(Miningweekly; Edited by: Creamer Media Reporter)

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