As the Globalising Murray & Roberts strategy unfolds, a clearer picture is emerging of the Group’s destination and the exciting new factors behind its future growth prospects

At the heart of Globalising Murray & Roberts is the desire to be a best-in-class global engineer and contractor, capable of competing in its opportunity-rich domestic market and in selected global markets that offer future growth.

Dr Iraj Abedian

General contracting in SADC

In South Africa, Murray & Roberts has forecast a major upswing in the construction industry and is gearing up people and systems capacity as an integral part of its transformation strategy. The Group’s optimism is based largely on growing demand for real fixed investment in basic infrastructure and services.

“South Africa is still relying on infrastructure built 30 years ago and which is no longer even being adequately maintained,” says Murray & Roberts group CE Brian Bruce. “To make up the deficit in maintenance, the economy needs to over-invest in the way that successful economies such as Singapore, Malaysia, Australia and the UK did to underpin their economic successes.”

A key driver of South Africa’s high GDP growth in the 1960s and 1970s was robust gross fixed capital formation (GFCF). South African construction companies thrived in this environment and then stagnated in later decades as GFCF spending declined.

Now South Africa is entering another period of growth driven by investment in infrastructure. The Government plans to boost infrastructure and fixed capital formation from 16% of GDP to 25% of GDP by 2014 – a move which should boost GDP growth from 3% to 4%  and lead to nominal GFCF growth of 13% for the next ten years, according  to US emerging markets analyst,  Neil Holzapfel.

“Projected future growth in South Africa presents a greater challenge than the investment boom of the 1960s and 1970s and we are equipping ourselves to be a global general contractor in our domestic market where there is significant opportunity in transport infrastructure, rail commuter and logistical services and power generation,” says Brian.

With its partners in the Bombela Consortium, Murray & Roberts has been selected as the preferred bidder for the Gautrain Rapid Rail Link project. The Group is also a contender for the Pebble Bed Modular Reactor (PBMR) project and is well positioned, through its empowered subsidiary UCW Partnership, to participate in projects that Transnet will undertake to refurbish its ageing stock of bulk freight locomotives.

Selected global markets
Globally, Murray & Roberts is focusing on complementary markets that offer good investment and growth prospects. The recent acquisition of Cementation has positioned the Group as a world leader in underground mining services, while the investment in Clough provides access to global oil and gas markets.

Addressing Murray & Roberts executives recently, Dr Iraj Abedian, economist and CE of Pan-African Investment and Research Services said that while South Africa’s economic fundamentals are generally sound, there is an urgent need to invest in the country’s economic and export infrastructure, particularly the sectors of logistics, energy and tourism.

The impact of under-investment has been significant. For example: South Africa is not able to export coal and other minerals because of a shortage of transport and other capacity. Demand for electricity is rising faster than Eskom’s capacity to supply it. With major international sporting events like the 2010 Soccer World Cup coming to South Africa, the country needs to strengthen the capacity of its transport and hospitality infrastructure to ensure that it meets global standards.

This has added urgency to the Government’s programme of infrastructure investment which is geared largely towards companies such as Transnet and Eskom and projects such as Gautrain.

Dr Abedian’s view supports the forecast by Murray & Roberts of a major upswing in the South African economy, driven by rising infrastructure spending.

Furthermore, Abedian says that the growing demand for infrastructure investment is also evident in other countries, many of which offer market opportunities to Murray & Roberts, such as the rest of Africa, Brazil, China, Russia and India.

by Lesley Lambert and Eamonn Ryan

Mining
South Africa has long been a world  leader in deep level mining, but other countries are starting to mine underground now.

Nickel Rim in Canada will eventually  be the largest deep mine in the world outside South Africa and Australia is developing more underground mines.

South Africa has valuable skills  and experience to offer these markets and leading global mining companies, such as Anglo American, BHP Billiton and Rio Tinto, which together account for more than 50% of global mining capital expenditure, rate Murray & Roberts highly as an implementation contractor.

Combining the activities of Cementation with Murray & Roberts RUC, the Group has created an integrated services capability to serve its local and global mining clients in the construction and development of their underground facilities.

Oil & Gas
The investment in Clough targets the oil & gas market. Though long a traditional construction company, Clough has repositioned itself in offshore oil & gas as a consequence of the development of the Australian offshore oil & gas industry. The company now operates globally in onshore and offshore oil and gas, petrochemicals, minerals and infrastructure and has good capability in project management, engineering and construction and facilities installation.

The transaction provides Murray & Roberts with an operational presence in Southeast Asia and access into the engineering and contracting oil and gas sector. In turn, it introduces Clough into regions of the world where Murray & Roberts has a leading presence, such  as the Middle East and the west coast  of Africa.

Within Murray & Roberts, the marine and MEI entities have the capabilities best suited to partner Clough and they are developing a strategy for their combined engagement with domestic and global oil & gas markets.

Power & Energy
Power & energy is considered to be one of the growth sectors in South African and African markets over the next decade. South Africa is already in need of additional sources of power supply and has a number of initiatives under way, including demand side management, bringing a number of mothballed power stations back into production, an agreement to share power brought from the Congo River and most significantly, exploring the possible use of nuclear power.

South Africa cannot build many more coal-fired power stations – they are expensive and the Kyoto Protocol does not tolerate the level of carbon emissions they generate. The country has limited hydro-electric potential and renewable sources of energy such as wind and solar are not yet economically viable.

“We believe in the potential of the PBMR programme and the promise of liquid natural gas (LNG),” says Brian. “These will require enormous infrastructure investment and we have the capability to participate in such developments. In Asia we view the LNG market as a major opportunity,” he adds.  While nuclear power has long carried safety concerns, the current thinking is that it offers one of the few sustainable options for energy into the future. Safety remains a concern, but the pebble bed model has the lowest safety risks. The waste is stored within the facility in a sealed environment.

Geographic focus
Geographically, Murray & Roberts operates largely in southern Africa and the Middle East and is exploring new opportunities in the eastern hemisphere, particularly in Asia and Australasia.

Building capacity
The challenge facing Murray & Roberts now is to ensure that it has the leadership and systems capacity to support these strategic initiatives.

In recent years, the Group has transformed its business entities, positioning them to offer superior propositions to their markets, while leadership capacity has been strengthened.

“We have enhanced our teams with new leaders who are less trapped in a past defined by a construction industry that was stagnant. To accomplish this we have had to take some risks. Are our new leaders sufficiently skilled? Have we made their appointments at the right time in the economic cycle?” says Brian. “I believe we have made the right choices. We now have a leadership better prepared to capitalise on a robust construction economy.”

To strengthen its systems capacity and assist in the delivery of the new strategic initiatives, Murray & Roberts is currently rolling out an Enterprise Resource Planning (ERP) project, which leverages the synergies of a unitary Murray & Roberts.

The project will provide an operational platform across the Murray & Roberts projects cluster which includes Murray & Roberts Cementation, Murray & Roberts Construction and Murray & Roberts Engineering Solutions. This platform  will consist of “JD Edwards OneWorld” ERP modules interfacing with existing and new project management and other business management applications already in use.

Future acquisitions?
“Our acquisitions have positioned us to capitalise on what we see as the growth sectors of the global economy and we will consider further acquisitions to reinforce our capability in these areas. Our engagement with global markets tests and strengthens us. It enables us to access new capacity in our growth sectors and to achieve our goal of best-in-class. This provides a solid foundation for future growth,” says Brian.