Turner & Townsend’s Kenya office explains the issues related to investing in Kenya’s young mining sector.
Turner & Townsend is a global company covering several key sectors. Could you give an overview of your African operations?
Mark Wainwright (MW): Turner & Townsend is a global capital programs professional services company that has been serving the industry for more than 70 years, representing the commercial interests of owners and operators, across the spectrum from junior to major companies, as well as funders. We have over 4,000 staff and an annual global turnover of more than half a billion USD. Our services cover the entire capital project life cycle, from the pre-feasibility stage onwards and includes advising on supply chain strategy, estimating an asset’s cost and schedule, managing contractual arrangements with the supply chain, execution and commissioning the asset.
Daimon Keith (DK): Africa is one of our eight global focus regions; we have been here for 34 years, first entering Africa on the back of our global mining clients. Now have almost 300 staff. We see East Africa, and particularly Kenya, as a key country to drive growth in the region and the continent . Mirroring our global business portfolio, the Africa business’s focus is split across property infrastructure and natural resource (mining, oil and gas) sectors.
What are the main challenges facing your clients in Kenya’s mining sector?
MW: The biggest challenge at the moment is global and relates to capital spend reductions, which are linked to commodity prices and supply and demand cycles. The investor climate is an issue in every jurisdiction we work in. Other challenges include limited infrastructure, capacity and capability – acute problems across Africa. In the mining sector there have been huge cuts in head counts and spending, so the difficulty in delivering projects is a major industry trend. We have the skills to support organizations that no longer have those capabilities in-house. At present Kenya is setting itself up for an investment drive into mining and working hard at policy formulation to do this.
What is your outlook for the development of the infrastructure sector in Kenya?
DK: I think the outlook is very positive. Power is a big opportunity – the country needs to produce more megawatts, although it does not have much experience delivering the type of big projects it needs. Roads and water are also important areas. The big issue, as always in Africa, is that we have a reputation as a challenging market in which to invest. PPPs have been used in Kenya in a few instances and there are many willing DFI-type funders, the challenge is that historically the continent has suffered from transparency problems. If the deals can be structured correctly, there will be interest from private funders in North America, Western Europe and South Africa. There is no shortage of people wanting to invest, but they are looking for a friendlier investor atmosphere that comes with financial stability and evidence that the capabilities exist in the country to execute these projects efficiently.
Focusing on East Africa, what must governments address in order to attract investment?
MW: Government policies in terms of royalties are most important – high royalties dissuade spending. Careful management of majority government shareholders can also be very important; in Botswana, for instance, De Beers has the government as a majority and critical stakeholder in the development of mines.
How realistic is Kenya’s target of 10% of GDP by 2030 for its mining industry?
MW: Kenya still has a long way to go, but it is heading in the right direction. It is good that tertiary education in Kenya is focusing increasingly on mining. The industry making up 10% of GDP by 2030 is a stretch target for Kenya, and not unrealistic – the country has not yet discovered huge deposits but 2030 is a long way off, albeit resources are abundant in neighboring countries.
What are Turner & Townsend’s objectives, for the next few years, in supporting the mining industry in East Africa?
DK: In Kenya, I have been set the target to grow the business to 50 people within two years, which will support our 2020 vision for global growth. We definitely see the East African hub being a major contributor to our African business. Regarding mining, Turner & Townsend will continue to maintain relationships with international clients and support local junior miners starting up. Investment in mining is cyclical, and there is no doubt it will come.
MW: When companies do enter the market they will be looking for service providers to assist them; and these providers should be based in country, show a strong understanding of the local markets and have adopted a localization strategy- whilst being able to bring global knowledge and expertise from the industry. In order to offer an end-to-end service Turner & Townsend wants to become part of the overall extractive industry community, so we are making great efforts to work with the legal, accounting, consulting and technical sector participants as well as the developers of projects.