Ethio Lease this month became the first foreign-owned company to secure a financial services license in Ethiopia. Simplifying the country’s forbidding bureaucracy would help the country’s leasing market to reach its full potential.
‘We don’t need any regulation that enforces localisation to be local’: Farid Fezoua, CEO, GE Africa
15-year company veteran, Farid Fezoua, says General Electric (GE) is in Africa for the long haul, focusing on healthare, aviation and power across the continent and in its core markets in Nigeria and South Africa. He assumed the role of President and CEO of GE Africa on 1 October 2018, a role he’s combining with his position as President and CEO of GE Healthcare Africa.
TAR: General Electric (GE) Healthcare launched the Managed Equipment Services (MES) initiative in Kenya and plans are underway to launch in Uganda. What does the program entail?
FARID FEZOUA: I think Kenya was a trigger because it was the first time we thought about how to manage the aspects of technology, capability building and long-term service maintenance in a way that is much more efficient than we’ve done in the past. The MES provided a very simple solution which didn’t need to go into the complicated forms of public–private partnership (PPPs), similar to a Pandora’s box where anybody can pull anything from. So we started the MES in Kenya and faced with a problem that was very simple. We keep pouring a lot of money into buying equipments that after a year or two break down, lie idle and do not deliver the required service to patients. So […] instead of just putting a lot of money upfront to buy technology, we came up with the MES which simply means that you combine technology with continuous training, skills and development and service and maintenance over a period of time.
What role does GE play in the MES partnership and what has been the feedback?
The MES is basically a turnkey contract provided by the likes of GE with a ministry of health, whereby the responsibility of setting, installing, servicing the equipment over time and training [staff] shifts from the ministry of health to the private firm, against the payment of what we call a fixed unitary charge, paid quarterly for the delivery of the service and not just the equipment. I think that’s where the revolution is in terms of how we were doing things before and how we are doing things now. If we look at two years into the program, for the first time the Ministry of Health in Kenya – it’s the same thing in other parts of Africa – is actually enjoying functional equipment and technology and is benefiting from a training program that enables the patient to get diagnosed at any time. Today I think other countries are seeing that this concept is actually working. A lot of the Ministry of Health personnel [from other countries] have come to Kenya to look at it, and they have themselves witnessed that some of the burdens they see in their countries can be solved in a simple way.
There have been problems with payment delays and pending bills. As you prepare to expand into other countries, what lessons are you taking from the Kenya experience?
I think that it’s critical for the sustainability of these kind of programs or solutions […] and I think its shared responsibility and obligations. We have an obligation to deliver against obligations from the government being met, and out of which payment of the dues on our lease base are met. The Kenya MES was structured without a sovereign guarantee which is quite unique in the health sector because typically project financing in healthcare projects are challenging, unlike the power [sector] where you would get a utility paying and honouring obligation under a power purchase agreement (PPA). Here it’s basically a Ministry of Health that depends on a budget, and in a system that is not necessarily at hospital level, generating cash flow or revenues to honour these payments. So we brought two commercial lenders from South Africa; Standard Bank of South Africa and Rand Merchant Bank, to fund the technology part, which is about 50% of the overall program without any sovereign guarantees. We didn’t have the Ministry of Finance guarantee, all we had was a funders direct agreement between the banks, GE and the Ministry of Health, and a letter of comfort from the treasury to back the obligations of the Ministry of Health. In addition to that, because it had to be structured in a way that could be bankable, we convened a political risk insurance provided by African Trade Insurance Agency (ATI) which actually made the banks more comfortable with the sovereign risk. Overall it was a nice structure. In Uganda we need to build the confidence from the lender’s side, showing that without a sovereign guarantee governments are going to honour their obligations. What you want is that this experience is a positive one and that triggers the appetite from the lenders’ in terms of risk, and then you can expand it across the continent, which is what we are currently looking at doing. Now I don’t want to paint a bleak picture of the country, I think the lenders we’ve been working with in Kenya actually are keen to support us in other countries and under a similar model.
Nine of these technologies developed and created by GE have been accepted by the World Health Organisation
Technology plays an important part in delivering primary care but often transposing technologies that have been developed for hospitals in developed countries are of little use in low resource environments.
Exactly. So we’ve designed the Vscan access, a portable ultrasound like a flip phone developed for cardiac application. We didn’t even realise that it could serve as an obstetric kind of scanning system in low resource environments, but over the years we’ve used that first Vscan simply because some health workers found that it was actually adapted for rural care in maternal and new born health. Over time we’ve created another version of the Vscan which we call the Vscan Access that we made portable with a battery to avoid issues of power with a long lasting battery of many, many hours. Similarly it has a 3G connection to enable the sharing of images and Wi-Fi connection to enable the transmission of images by internet or by 3G. So that’s the antenatal care and postnatal care in primary care centres and this is what we are doing for instance in Northern Nigeria now or Ethiopia. Actually nine of these technologies developed and created by GE have been accepted by the World Health Organisation, which is a big nod to the fact that these technologies are definitely contributing to solve these problems.
Navigating local content regulation and policies across the continent can sometimes be an uphill battle. What has been its impact on your work and how committed is GE to using local resources?
We don’t need any regulation that enforces localisation to be local. For me it’s more about your capacity and capability to execute on your commitments and your promises and what you aspire to be that determines how local you are in each of these countries. In South Africa the localisation around particularly the Black Economic Empowerment (BEE) scorecard is very specific in terms of what you need to do to get to the scorecard positioning. We are currently at the BEE contribution level 4 [fully compliant] but we are working definitely on moving that up to the highest level [level 1] we can. But irrespective of that, whether it’s power, healthcare, transportation, we have been able to localise our workforce. If I look at the country-level leadership of most of our businesses in sub-Saharan Africa today, in South Africa its 100% South Africans, in Nigeria we are 100% Nigerian, in Kenya we are 100% Kenyan, in Algeria on healthcare 100%, Tunisia 100%, and Morocco 100%. So it’s not like before where we either had expatriates sitting in Africa or flying people in and out because the expertise at the time was in Europe, in the Middle East or in the United States. We’ve transitioned almost completely from that. I’ll give you an example because it’s important. 10 years ago in Africa the typical model for was to have account managers who were really the sales frontliners running commercial operations, and you would have had maybe a few service people but that would have been it. When you had to discuss or negotiate a contract with a customer, you would then have to fly people in from the US to come spend a week to negotiate the contract. Today it’s all done in Africa and that’s a major shift.
In June this year GE installed it’s 100th power plant in sub-Saharan Africa. What can we expect from GE in the power sector in the coming year?
If you look at sub-Saharan Africa, Nigeria has definitely been a key market for us in power, particularly in all our range of gas powered turbines but Nigeria is not the only country. In South Africa if you look at steam-fired power plants, we’ve got Kusile and Medupi, two coal-fired plants using a steam technology that has been developed for the last seven years. Initially Eskom awarded Kusile and Medupi to Alstom but when we integrated Alstom it became GE’s. In fact 80% of the installed base in power in South Africa today is GE, that’s a big big footprint. Even when we compare that to Nigeria, it’s a huge presence and responsibility in terms of power generation under these huge multiyear projects. It requires a whole lot of project development, project management and execution capabilities that we are very proud to have.
80% of the installed base in power in South Africa today is GE, that’s a big big footprint
In Nigeria you invested $90m in a Calabar manufacturing plant for power services but there’ve been some bumps along the way. What is the latest on the project?
Calabar, just like some of our other projects, has been put into the perspective of a long term commitment to the country and to Africa. GE has taken steps towards that, whether it’s Calabar, whether it’s our locomotive assembly facility with Transnet in South Africa, whether it’s our Healthcare training centre in Kenya, it’s always looking long term. But at the same time it always comes with some sort of commitment from the county that this localisation in terms of capacities and capabilities would be supported. So I think it’s more of a parallel journey that you take with the government particularly in these industries, whether it’s oil and gas or power. The facility has been built, although we are yet to have a proper, formal commissioning ceremony. And for that facility to be operational it would require a reasonable volume of business. So we’ve done our part by investing in a facility, now we need to get the deals to make it operational.
One of such deals is the $10bn Bonga South West-Aparo deepwater oilfield project, a possible primary source of business for the Calabar plant. What are your thoughts on the protracted delay in taking a Final Investment Decision on the project?
We just need to get it [Calabar] to be busy now and the only way you get that plant busy is by bringing in business. When you go into these kind of local capability building, particularly when infrastructure is built, there is an understanding that it’s going to be used by the country and that is the motivation behind the investment. So we are committed, we’ve demonstrated our commitment and again Nigeria for us is a long-term commitment, and it will stay a long-term commitment.
GE has a huge market share in aviation, about 80%, and you recently signed a deal with Ethiopian Airlines. What are your plans for the aviation sector in Africa?
We will continue to strengthen the partnership that we have with Ethiopian Airlines and Kenya Airways, which are two prominent airlines in Africa and to some extent, probably those that over the last decade have shown the biggest growth in Africa. We’re also looking to do more with South African Airlines. We’re big in Angola in terms of oil and gas and healthcare to some extent, but we want to do more on the aviation side. Then there’s the whole private market that is going to be developed, not just state airlines but also private airlines. In South Africa for instance we are seeing an impressive growth in our business with these private airlines and I think we’re going to see that throughout the continent in the next few years. So I truly see that as a big area of growth for us, and these narrow and mid-ranged body aircrafts for our engines are the sweet spot of GE. So we’re going to play that very aggressively and even though we have 80% of market share I’m still hungry and thirsty for more. And we’ve got a great team, this is a typical example of a nimble small team but with big expertise, with really great relationships in Africa and there are not too many of those. I think it’s the whole experience of the business globally, the expertise, the knowledge that enables us to be so effective on the ground.
Any other sectors that will be of interest moving forward?
Within the power sector we need to underline renewable [energy]. I think we’ve been talking about renewable on the African continent, but has this been a reality? Yes in some places we’ve seen a big surge in wind power, in South Africa for instance over the last probably seven years. With geothermal we’re glad to be associated on the grid side with some of the geothermal projects in Kenya, not that we’re deep into the technology of geothermal generation per say, but we can help with everything around. […] We’re also very keen to drive solar solutions. Solar is also at the top of our mind in Africa because solar is going to be a complete revolution the day you fix the storage solution and you’re able to distribute electricity immediately. For me that’s the leapfrog we’re talking about to produce the electricity and have the storage capacity that enables you to maintain a constant level of power supply. And GE is definitely going to be focused on that, we are already focused but we’ll be – and I’m just hoping to see Africa being the world’s landmark for GE in terms of showing the way it should be done.