Tobias Becker, Director Africa, Head of 1000-Day Africa Program, April 2016
Anchoring ABB in Africa – for good
Some thoughts and lessons learned
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April 11, 2016
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April 11, 2016
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1Incremental
3rd party + internal revenue vs. 2014 baseline; 2Source: ATLAS, Global Customer HQ
African growth driven by mega trends
ABB portfolio is highly relevant for the economic development
Population growth and urbanization
African population expected to increase
by 200m to 1.3 bn by 2020 (~3% CAGR)
Urban growth over last two decades at
3.5% CAGR expected to stay constant
Population of African cities will grow by
~100 m to reach 550 m by 2020
Urban population to drive the need for
infrastructure (transport, buildings,
electricity, water, etc)
Emerging middle class
Middle class emerging in a number of
countries thanks to increasing stability in
politics and economic policy
About 300 m people (34% of population)
are considered middle class today, i.e.
they spend $2 to $20 a day
Middle class to drive boom in consumer
spending (set to rise from $860 bn in 2008
to $1.4 trillion in 2020)
Global demand for commodities
Africa holds significant deposits of all
major commodities
Africa’s growth has so far primarily been
driven by the demand for its resources
The developing world will fuel the demand
for resources in the long-term
Several countries have understood that a
diversification of their economy into
manufacturing is needed to provide
employment in urban areas
International companies have been active
in the region for quite some time already
Recent discoveries have brought new
countries onto the investment radar
Electrification and power infrastructure
Less than 10% of Sub-Saharan rural households have access to electricity as of today
(less than 25% overall)
In 30 African countries, endemic power shortages, at all economic levels, are a way of life
Annual spending requirements to meet increasing demand by 2040 and to connect at least
60% are $ 33 bn for generation and $ 9 bn for interconnections and distribution
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April 11, 2016
African manufacturing
The rise of labor cost in Asia has had a
positive impact on Africa’s manufacturing
competitiveness
Mobility and transport infrastructure
Sustained underinvestment in transport infrastructure resulted in decrepit infrastructure
and the highest transport costs

African countries have invested 15-25% of GDP in transport infrastructure over last decade (vs 32%
for India and 42% for China)
Governments and private investors have shown determination to act:

~80 large projects (>50m each) to improve infrastructure in progress
Sources: United Nations, African Development Bank, IMF, World Bank, McKinsey Global Institute
Note: The bank’s definition of middle class in Africa is people who spend the equivalent of USD 2 to USD 20 a day — an assessment based on the cost of living. However, many living on $2-4 a
day could easily slip back into poverty. Taking them out of the equation, puts the stable middle class at 120m (13% of population)
Slide 3
Scope and capabilities are highly relevant for Africa
ABB today
What
(Offering)
Power & Automation
Power ~ 40% of revenue
For whom
(Customers)
Utilities
Industry
Transport &
Infrastructure
~35% of revenue
~45% of revenue
~20% of revenue
Where
(Geographies)
Globally
AMEA1 37%
$42 bn
revenue
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April 11, 2016
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1Asia,
Automation ~ 60% of revenue
~100
countries
Middle East, Africa
Americas 29%
~145,000
employees
Europe 34%
Single “A”
credit rating
Listed in
Stockholm, Zurich,
New York
Well positioned in attractive markets
A leader in power & automation in all our segments – examples
Power & Automation
Utilities
#1 in transmission and distribution
Largest installed T&D3 base
Technology pioneer (FACTS1, HVDC2 breaker, etc.)
Leading service capabilities
Deepest and broadest portfolio of offering footprint
#2 in solar inverters
Strong innovative software portfolio
Industry
Transport &
Infrastructure
#1 in Distributed Control Systems
A leading robotics player
#1 in gearless mill drives for mining
Strong innovative software portfolio
#1 in industrial motion (motors and drives)
Leading service capabilities
A leading player in infrastructure /
building electrification
#1 in electric propulsion for ships
#1 in terminal automation for ports
#1 for large industrial turbochargers
A leading player in electric train traction systems
A leading player in high-speed train retrofits and
wayside power systems
A market and technology leader in EV4 charging
Our aspiration: #1 or #2 in all segments
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April 11, 2016
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1FACTS:
Vehicles
Flexible Alternating Current Transmission System; 2HVDC: High Voltage Direct Current; 3T&D: Transmission & Distribution; 4EV: Electric
Global trend – big shift in electrical value chain
Africa in many ways a trail blazer of change
Renewable share: ~40% of capacity by 2035
Generation mix
Greater volatility, less predictability
More feed-in nodes
Increasing complexity
Power
transmission
and distribution
Control / information flow is key value driver
Transmission: longer distances, higher
voltages
On- and off-grid
Micro- / Nanogrids
Control / automation on “local” level
Energy storage is key
We are at the forefront of the change
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April 11, 2016
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Global trend – 4th industrial revolution
Parts of Africa lost out on the first 3… now it’s time to leap-frog
Industry 1.0 – 1712
Industry 4.0 – today and tomorrow
First practical steam engine
Internet of …
Things
People
Industry 2.0 – 1870
First elevated conveyor belts
Industry 3.0 – 1969
Services
Electronics / software based control
We lead proactively with new connected offerings
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April 11, 2016
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Africa is leap-frogging in many area
Still weak institutions and red tape main impediments
Key factors ABB is considering
Main challenges and needs
•
Africa’s sheer size, diversity, and demographics
•
Education system and job creation. Harmonization and
cooperation, while protecting cultures and heritage.
•
Need for power and transport infrastructure, presence
of natural resources, ramp-up of manufacturing sector
•
Deeper industrial value-chains and diversification of
sectors key to ensure independence and wealth
•
The change in grid topology, with Africa becoming the
front-runner for renewables and off-grid generation
•
Business models, tariffs, and legal framework needs to
foster financing and investment
•
Africa, the ‘wire-less continent’: wireless telecoms,
wireless internet, wireless payment systems, wireless
banking, wireless government services, and now
‘wireless power’ (off-grid distribution / Microgrids)
•
The chance to become an innovation power house.
Scarcity, limitations, and lack of affluence can become
the fuel for creativity (see medical sector)
•
In pockets of Africa, tertiary sector already by-passing
industry. Already today, only 13% of GDP growth stems
from natural resources (#1 telecoms/internet, #2 transport &
•
Africa could be the first economic region to crack the
classical sequential economic development. For that
Africa needs to become a kind of national market
mobility, #3 wholesale & retail)
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April 11, 2016
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A long history and broad presence
ABB today in Africa
~5000
$ 1.2
billion
Employees in Africa
Present
in
~21
In revenue
(2015)
First operation
in Egypt
African countries
1926
Kicked off in South Africa 1945,
restarted
1992
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Are we too late?
No, but about time to be serious and skip the opportunistic approach
•
•
Over decades ABB used an opportunistic approach:
•
Getting a project, drop-shipping technology solutions, and
leaving
•
Acquiring local companies, misunderstanding culture, and
retracting
•
Not getting over the ‘sell to the market’ phase of
development
•
Concentrating too much on two gateways (EG, ZA)
•
Treating all of Africa the same (as Europe)
As result…:
•
Our business grew small single digit p/a
•
We lost touch with our own installed base
•
Goodwill in some countries wiped out over night
•
Not seen as employer of choice. Struggling to attract talent,
in spite of 5 million graduates per year
•
Cluster risk due to concentration of revenue and
suffocating structures in smaller countries
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April 11, 2016
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Recent developments and new approach
Growing significantly and anchoring ABB in Africa – for good
• Strong focus, dedicated team, 1000-Day Program for Africa, high double digit growth
• Re-discovering our installed base (>215’000 equipment items catalogued) and re-building our service force
across Africa
• Working with export countries, our local teams, and institutions to identify large project opportunities that
propel the national economies forward
• Compiled finance framework to help accelerating projects
• Dedicated human resources and talent team driving recruiting, university cooperation, training programs,
scholarships, internships
• Teaming up with local partners, building our network, sharing tasks
• Broadening geographic exposure to stand on more than two legs
• Vastly simplified operations model for small countries
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Some personal observations
• There is not one Africa, we talk 54 countries, thousands of languages, most climate zones, huge distances,
logistics issues, different development stages of economies, variety of cultures, political systems, religious
divides, racial issues….
• …but, we can always drive for reasonable simplification! For each particular situation / opportunity, the reality
can be amazingly clear.
• There is a lot of risk: compliance, security, safety, law enforcement / interpretation…
• …but we can manage those risks and transform them to a simple cost of doing business. E.g. fostering
highest safety culture and achieving results => contributing to society
• Our image of Africa is partially outdated, distorted by media focus on ‘juicy catastrophes’, and yes, there are
real world problems….
• …but Africa has it all: 60% of the world’s arable land, abundant resources, young, growing population, huge
renewable energy potential, great culture, creativity, taste, fashion
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April 11, 2016
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April 11, 2016
Africa has huge renewable energy potential
Solar is the largest, but also wind, hydro, geothermal
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April 11, 2016
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Powering the fastest growing continent on earth
Consultancy and design, electrical
systems, intelligent power
management, Grid stabilization and
storage, supported by a
comprehensive service portfolio
Wind power, Kenya
Partnership with Vestas Wind for Prosperity
initiative towards hybrid power generation in 100
communities reaching at least a million people
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Everything under control at 4th largest coal-fired power station in the world
Kusile, South Africa
Kusile will be the fourth largest coal-fired power
station in the world and will help boost South
Africa’s capacity. With ABB’s technology the
efficiency surpasses that of conventional coalfired power plants, producing lower emissions
and reducing fuel costs.
Complete plant control and instrumentation, boiler
protection, plant simulator, engineering,
installation, commissioning, optimization and
training.
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Drinking water for millions of people in Algeria
Maagta Desalination Plant
Located at Oran, Algeria’s second largest city,
the reverse osmosis seawater desalination plant
will produce up to 500,000 cubic meters of
drinking water a day, enough to meet the daily
requirements of about five million people.
Complete electrical solution,
Medium Voltage Drives.
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