Often underrated, the concept of commercial development is crucial to create an economy that constitutes a healthy environment for business.
Like millions of South Africans, Lwazi Sikwebu was born and raised in the hustle and bustle of a South African township settlement—one called Mdantsane, located outside East London in the Eastern Cape.
Although General Electric SA’s Director of Commercial Development (and recently-appointed member of the Board of Directors) claims he’s not much into sport, he’s no couch potato either. Testament to this is his achievements in countless full- and ultramarathons: the Ultimate Human Race—the Comrades Marathon (2013), and two Two Oceans ultramarathons (2013 & 2014) to mention a few.
Sikwebu started his career at the local subsidiary of a global petrochemical refining and marketing company. Over that nine-year interval, he occupied different roles, mainly in sales, marketing and operations. Thereafter he spent almost four years in a consulting role within one of the ‘Big Four’ global headquartered professional services firms (previously referred to as audit firms) and joined GE in 2010.
BBQ caught up with him to get the inside scoop on his favourite topic: commercial development.
What is the general state of commercial development in South Africa at the moment? Any trends worth mentioning?
As the title suggests, commercial development refers to the architecture of commercially viable, but novel and unorthodox, proposals to customers on how to address their pressing challenges. To be attractive, it’s a key requirement that these solutions are innovative and mutually beneficial.
At the moment, a growing trend in commercial development in South Africa is the mounting need for depth and insight. Increasingly, the market is demanding more uniqueness and complexity in the solutions provided by commercial development practitioners. This is forcing commercial development practitioners to enhance their skills, much deeper, in the industries they serve; and, on many occasions, in other areas/industries as well. Merely being a shallow generalist is no longer enough to satisfy customer needs. Customers dislike being told something they either know already or can get to know fairly easily. Commercial development practitioners have to demonstrate depth, and provide credible insight to their customers. For example, if a commercial development practitioner proposes that developing a new power plant would deliver benefit for a certain country or region, the customer would want to know details in addition to the usual engineering/technical intricacies of the plant:
- How will the plant be financed?
- Will the finance package align with the host country’s financial/economic status?
- How will the plant be designed?
- Will the development’s proposed legal constitution be compatible to the host country’s legislative framework?
- Are the proposed tariffs in line with the country’s electricity tariff environment?
- Will the proposed methodology of developing the plant address pressing social challenges?
- Does the engineering composition align with/to issues of recently enacted labour laws etc.?
The customer will also expect the commercial development practitioner to have views and insights on the seemingly imminent carbon tax legislation, the requirements of the National Development Plan etc.
Looking at commercial development in South Africa, what are some of our most prominent emerging markets at the moment?
From a commercial development perspective, the renewable energy market and the distributed power market (such as off-grid power-generation solutions) are the most notable emerging markets, also across the continent. These two markets, all over the African continent, are where telecoms were in Africa 20 years ago. The majority of economies in Africa enjoy unprecedented growth levels—this, in the face of stagnating economies elsewhere in the world. This economic growth demands power, which currently is in dire short supply in the continent. Economic forecasts suggest these economies will continue to grow. Therefore, the demand for power—the power generation market, for example—especially the distributed power market, will also continue to grow on the continent. Since most of the funders of these power-generation projects (and the lenders to these economies themselves) are, and will continue to be, global funding institutions with a strong green mandate, there will always be a push toward the development of renewable energy.
Why is infrastructure development important for commercial development in South Africa?
It is certainly important for the development of any country’s economy. Therefore, South Africa is no exception. Some infrastructure scholars argue a country’s economic growth mimics investments into infrastructure development. In other words, they contend that economies which invest proactively and concertedly into developing infrastructure, continuously, and not just on a project or need-specific basis, tend to show an almost commensurate upswing in economic activity. A more resolute view on this topic suggests economic development ‘follows’ infrastructure investment. The contention is that growth in economic activity, although in varying degrees, is almost always a natural consequence of any investments into infrastructure development.
Which industries are most impacted by lack of infrastructure development, and how much does South Africa still need to accomplish in terms of infrastructure development?
Albeit to different extents, the lack of infrastructure development always has an adverse impact on all industries. There are two categories of the infrastructure that needs to be developed, in any economy: social and commercial infrastructure. South Africa has made very significant advances in developing the country’s social infrastructure such as housing, schools, clinics, libraries, police stations and community halls. While there have been very noteworthy investments into commercial infrastructure as well, more could still be done. South Africa certainly needs more power stations, railway lines, water (storage, treatment and supply) infrastructure and gas pipelines (for gas import and gearing for export at a later stage).
Having a deep understanding of a number of industries, what are the biggest challenges respectively faced by the transport, energy, healthcare and aviation industries?
Specifically in South Africa, and across all the aforesaid industries, skills shortage continues to be a crippling challenge. The absence of local well-qualified personnel in these industries has a retarding effect on many of government’s noble initiatives to address issues of localisation, job creation and the creation of viable local secondary industries such as the service and maintenance sectors.
How is the rising cost of electricity prices affecting businesses at the moment, and what advice do you have for them to mitigate this?
For many businesses, electricity is an unavoidable input cost—and a very significant one. In terms of advice on using electricity sparingly, many government institutions—Eskom, the Department of Energy, National Energy Regulator, regional electricity distributors and the municipalities—have competently delivered various programmes in this regard. Both the South African citizenry and corporations are well educated in this field. However, further to adhering to these electricity conservation practices, I would advise businesses to invest now for forecasted electricity cost increases. It’s an almost guaranteed impossibility that electricity costs will ever reduce going forward.
Why is partnering so important in our current economic climate, and how does General Electric engage in effective partnerships?
Institutions that provide technical solutions very seldom package and offer these full solutions on their own. Today’s commercial landscape tends to require partnering, where different institutions go into partnerships to ensure efficient delivery of superior solutions. They leverage each other’s areas of strength, and complement one another’s shortfalls. GE SA has forged many partnerships with numerous supplementary service providers. For instance, there is currently a partnership arrangement with a leading South African hospital group and a very prominent local construction firm to package hospital revitalisation solutions. This is part of the government-spearheaded National Health Insurance cause. Another flagship partnership is the one with Transnet Engineering, the train-building unit of the state-owned freight and logistics group, Transnet, to build heavy-haul locomotives at its vast Koedoespoort facility just outside Pretoria. This partnership makes perfect sense, since GE does not have its own locomotive manufacturing facility in South Africa. Consequently, this partnership arrangement has led to the awarding of a contract to build and export 10 locomotives to CFM, Transnet’s counterpart in Mozambique.
You have been described as being part of a new-generation, younger executives group. What should our new breed of executives be focusing on in South Africa?
I think the new generation of business executives should focus on amassing as much domain expertise as possible, as early into their career as possible.
What is the importance of international partnerships for our economy?
Almost all business, big and small, is going international. The commercial platform has opened up and it knows no geographical boundaries. Being comfortable with, and competent in, international dealings are necessary preconditions of success for anyone who operates in Africa’s power/electricity sector. For instance, I cover southern Africa. For me to be able to package propositions of eminence, I need to consider, and incorporate into my propositions, cross-national arrangements such as the Southern African Power Pool and ZiZaBoNa (Zimbabwe, Zambia, Botswana and Namibia) project; the former being a 1995 co-operation agreement for a common electricity market between the national electricity utilities of the Southern African Development Community. The latter is a power interconnector/transmission corridor between the power utilities of Namibia Power Corporation, Zimbabwe Electricity Supply Authority, Zambia Electricity Supply Corporation and Botswana Power Corporation.
Executive positions have traditionally been associated with a more analytical kind of thinking. In terms of being innovative, creative and flexible, how important is this to South Africa’s new breed of executives, and why?
Further to the concept of domain expertise, yes, certainly, business executives require innovation, creativity and flexibility. The market requires these skills. However, business executives would find it difficult to deliver this required innovation, creativity and flexibility in the absence of domain expertise. Superior domain expertise is a necessary qualification. I argue for effective delivery of innovation, creativity and flexibility.
Tell us about some of the innovative solutions in the various industries in which you have been involved.
In my experience, the movement by our customers toward enhancing localisation is the most innovation-demanding aspect of our business. As a contract requirement, customers would typically insist on a certain percent local content on the products/solutions they’re purchasing. For example, as a contract requirement, a metropolitan municipality in a recent contract had fairly significant local content requirements for the smart metering solution they wish to procure. The contract makes it the responsibility of the technology provider to figure out how the local content requirements will be met. In addressing this, we would unpack one smart meter unit, dismantle it down into individual components and decide on the components that can feasibly be sourced locally. Almost always, the value of components that can feasibly be sourced locally would not match the customer’s local content requirements. This situation then requires innovative solutions. Typically, we would look into initiatives such as partnering for local assembly of some components or we would source local suppliers that could value-add to our components i.e. this is where GE would supply the skeleton and a local supplier would add value to the smart meter, or to the components of the smart meter, to the customer’s specifications. In recognition of the growing need of such partnerships, and to respond to the shortage of suitably qualified local suppliers, GE SA has creatively established a R200-million supplier development vehicle (SDV). Innovatively, this vehicle’s mandate is to identify, finance, develop and possibly incubate black-owned small and medium-sized enterprises (SMEs). This innovation will focus on raising the capacity of black-owned SMEs to supply into GE’s portfolio, with General Electric providing the initial offtake, which will act as the foundation from which the SMEs will seek other prospects.
In the first phase, eight black-owned industrial companies are being identified to supply components and services to General Electric SA as part of the delivery on the R7.1-billion (233 diesel locomotives) order from Transnet Freight Rail. The SDV will also seek to co-operate with development finance institutions and other companies to broaden the impact of this innovation.
In terms of transformation, how is General Electric SA doing in terms of its BBBEE rating and initiatives?
Broad-Based Black Economic Empowerment and the wider transformation agenda are key areas of focus for General Electric SA. As testament to this, GE SA will be investing an additional R500 million in a Customer Innovation Centre (CIC). This is further to the R200 million invested into the SDV. The CIC will recruit and develop about 100 technical resources including technicians, university graduates and experienced engineers. The qualification requirements will include an engineering degree or equivalent from a further education and training college. Young black graduates from rural areas will receive a deliberate and disproportionate priority. The CIC, which will focus on research and development, will become GE SA’s local ‘centre of excellence’ for innovation and technology transfer. To be located in Gauteng, the CIC will ensure GE technologies and solutions are localised for application in South Africa, and the rest of the continent. The CIC will also facilitate for the recruited engineers to team up with local universities and with engineers from organisations such as TE to develop South African-inspired solutions from GE’s existing energy, healthcare, lighting, and rail transportation product portfolios. At the CIC, courses developed at the GE’s Leadership Institute in Crotonville, New York will be made available to South African and African candidates.
With the importance of moving toward green business, what are some of GE’s contributions to a greener SA?
GE is the champion of supplying environmentally conscious technologies, advocating for the green agenda. Our green agenda is embedded in research, in product design, in product development and in operations. For well over 10 years now, and following a clear directive by the group’s Chairperson, Jeff Immelt, all the technologies developed by GE are now designed to consciously promote the green agenda. Immelt gave this decree to all of GE’s businesses, across industries, and even coined a phrase for this campaign: ecomagination. So determined was Mr Immelt about this directive, he even appointed a senior executive, reporting to him directly, to oversee the execution of ecomagination to ensure all the different GE businesses (GE Healthcare, GE Energy, GE Aviation, GE Transportation) develop only green-compliant technologies. With respect to contributing toward a greener South Africa, we supply to the market only green-compliant technologies. Currently, and fortunately, we have no requirement for ways and strategies to ensure the technologies supplied to the market become greener because only green technologies are in our portfolio.