“IN AFRICA WE CAN DO IT”

South Africa’s Project Management Experiencesas an South African ‘Export’

Presentation by Sean Flanagan

African Rhythm Project Management Conference

22 April 2002

Paper presented at African Rhythm Project Management Conference 22 – 24 April 2002, Johannesburg, South Africa

Hosted by: Project Management Institute of South Africa (PMISA): www.pmisa.org.za ISBN Number: 0-620-28853-1

On the Proudly South African campaign, President Thabo Mbeki,

“The campaign initiative "should serve not only to inculcate in

every South African a deeper consciousness of who they are and what they

can do to change their lives for the better, but also help in a particular way

to promote our exports. This, of course, would impact positively on

economic growth and job creation."

In particular, Mbeki noted, the campaign offered a "unique opportunity to

our exporters and trade promotion agencies to entrench South Africa's

brand in global markets".

South African Project Management expertise applied outside the country should lead to an increase in the

export of goods and services

PRESENTATION OVERVIEW

Project Management in the perspective of South Africa

• First world expertise in an emerging economy

• Diversity of challenges and yet world class

• South African projects on par with the rest of the world

• Homegrown examples of world class industrial projects

Murray & Roberts Engineering Solutions as World Class Implementers of Projects

• Developing leading Project Management teams

• Why World Class?

Project Management in the context of a case study

• Mozal

PROJECT MANAGEMENT

IN THE PERSPECTIVE OF

SOUTH AFRICA

• First world expertise in an emerging economy• Diversity of challenges faced, yet world class• South African projects on par with the rest of the

world• Home grown examples of world class industrial

projects

FIRST WORLD EXPERTISE IN AN EMERGING ECONOMY

• Misperception of available expertise in South Africa

- We work within an emerging economy, but are capable of delivering first world

projects

- Take first world technology and apply in a third world country

• Joint venturing on projects best leverages international expertise

- International expertise used to augment our knowledge base and skills

- Extensive experience required to select most effective joint ventures

- Challenges to managing the joint venture

• In South Africa obstacles CAN be overcome

- A solution can always be found

- South Africans make a plan - Mozambican flood example

- South Africans proud to share learnings, expertise and experiences

DIVERSE CHALLENGES FACED, YET WORLD CLASS

• Diversity of challenges to working in an emerging economy

- Lower skills level

- Language obstacles

- Labour force issues/ working with unions

- Cultural problems and issues

- Diseases and HIV AIDS affecting the work force

- Environmental issues

- HSEC

• Confirmed world class performance

- Third occasion that International PMI of Year Award won by a South African company

- The joint venture of SNC Lavalin Murray & Roberts Mozal project - won International PMI of Year Award 2001

SOUTH AFRICAN PROJECTS ON PAR WITH THEREST OF THE WORLD

• Leveraging of homegrown expertise:- South Africa has the deepest mines in world

- Low power costs leads to greater beneficiation

- Sasol Gas to Liquids

- Denel technology

- Electronic and IT

• South African companies have listed operations on the London Stock Exchange:- SAB, BHP Billiton, Anglo American and Sasol

- Humble beginnings in South Africa, now global players

- Project opportunities created by them afford ‘tag-on’ for local companies

• Worldwide the value and high level of South African project management expertise being recognised

- Port Hidd, Bahrain

- Lake Kivu, Rwanda

- Pebblebed Modular Reactor

HOMEGROWN EXAMPLES OF WORLD CLASS INDUSTRIAL PROJECTS

• Uranium Enrichment Project• Richards Bay Coal Terminal• Sasol 11 and 111• Kelloggs Factory Revamp• Mossgass• Aluminium Smelters

Past

• Long pipelines• Sasol Gas to Liquid Projects• PBMR

Future

MURRAY & ROBERTS

ENGINEERING SOLUTIONS

AS WORLD CLASS

IMPLEMENTERS OF

PROJECTS

Developing leading Project Management teams

Why World Class?

DEVELOPING LEADING PROJECT MANAGEMENT TEAMS

• Recognised value of joint ventures

• Selecting the right joint venture partner to complement existing skills and expertise using

the right commercial formula

• Once off projects requires Project Management flexibility

- Expertise is developed

• Grabbing a larger share of the future:

- Integrated project management system

- New resource model/ outsourcing alternatives

- Knowledge management

- Value chain management

- Attracting the best people to the job

- Resource location and mobility

- Learning processes required for knowledge based company in an emerging economy

WHY WORLD CLASS?

• Vision:

- World Class Implementers of Projects

• Core proposition:

- Seeking Solutions for Emerging Economies

- Applying other people’s technology

• Offering:

- Demonstrated capability

- Accountability for our performance

- Flexible and focused client service

- A passion for what we do

PROJECT MANAGEMENT

IN THE CONTEXT OF A CASE

STUDY

Mozal

MOZAL: PROJECT OVERVIEW

Mozal Aluminium Smelter Project

•

MOZAL: LOCATION

In putting the success of Mozal into perspective it is important to remember that…

“This was a grassroots fast track project in Mozambique, a country that has had a very poor infrastructure and a largely unskilled labour force following two

decades of war.”

Adam Smith - Wealth of Nations3 requisites for business to flourish

Absence of war

Low taxes

Reasonable application of justice

For a smelter add:

Low price of power

Proximity of deep water port

Reliable Alumina supply

WHY MAPUTO?

OWNER MOZAL S.A.R.L.

BHP Billiton - 47%

Mozambican

government - 4% IDC

- 24%Mitsubishi

- 25%

PROJECT HISTORY

Snc-Lavalin Murray & Roberts Engineering Solutions Joint Venture:• SNC-Lavalin: Canadian engineering/ construction firm

• Murray & Roberts Engineering Solutions: a Murray & Roberts Group company

Successful EPCM contractor for Hillside Aluminium Smelter, Richards Bay:• 500 000 tpa

• 1st metal: June 1995

• Stable operation above nameplate capacity

BHP Billiton integral to the success of the project team

EPCM SERVICESPROVIDED

• Project Management

• Engineering

• Procurement

• Project Controls and Administration

• Construction Management

• Pre-Commissioning

• Owner assistance during commissioning

COMMUNICATIONS STRUCTURE

Key:

AP - Aluminium PechineyMPT – BHP Billiton Project TeamMOT - Mozal Operating TeamSLMR - SNC Lavalin Murray & Roberts Engineering Solutions (EPCM team)

SuppliersContractors

TurnkeysAP

SLMR MPTEPCM

Consultants MOT

GovernmentRegulatory

agencies

Working level communication Establish protocol

KEY SUCCESS FACTORS/ ENABLERS

Agreement with Eskom on power price

Support from Mozambique government:• Industrial Free Zone (IFZ) - 1995

• Project approval (IPA) - December, 1997

Low cost production

Key performance achievements

Schedule:• 1st metal achieved six months ahead of schedule

Budget:• Final capital cost of US$ 100 million under budget

Safety:• Final LTIFR of 1.7

Industrial Relations:• <0.5% of manhours lost to industrial action

Empowerment:• 5,500 Mozambicans trained in construction trades

• 70% of labour force local

MAJOR SUPPLY POINTS

MOZAMBIQUE

MA

LAW

I

NAM IBIA

BOTSWANA

ZIMBABWE

Lusaka

RSA

BEIRA

Durban

Windhoek

Harare

Gabarone

JohannesburgMAPUTO

ZAMBIA

Note: TRAC corridor road was under construction during smelter construction

Swaziland for

abnormal loads

Ressano Garcia (main entry point

for surface shipment)

Marine shipments

Air shipments

Marine shipments

Air shipments

LOGISTICS SHIPMENT POINTS

MAJOR QUANTITIES

• 24 000 tons of structural steel

• 16km of drainage culverts

• 235 000m³ of concrete

• 8.2km of fencing

• 38km of piping

• 800km of cabling

• 18km of cable trays

• Over a construction area equivalent to 340

soccer fields

MAJOR CHALLENGES

• Country factors

• Infrastructure

• Government liaison issues

• Labour issues

• Safety

• Health care

• Climate

CONSTRUCTION CHALLENGES

• Infrastructure

• Border and customs facilities

• Geotechnical

• Labour requirements- 9 000 total at peak (6 000 direct)- Limited use of expatriate labour- Training and development of immature local labour force - Untested local labour structures- Development of empowerment contractors

• Safety performance recognition and safety management programme• PLA signatories• Industrial relations (PLA success factor)• Malaria - 6 500 cases in clinic• HIV AIDS/STDs

PROGRESS - A BIRD’S EYE VIEW

April 1998 Aug 1998

May 1999 Sept 1999 July 2000

IN SUMMARY

Summary and conclusion

Questions and answers

Thanks to the PMISA

African Project Management isworld class

We have reserved a place on the global stage