Siemens CEO speaks to African Business Review

Siemens AG, best know as Siemens, has been at the forefront of engineering since its inception in 1847. The German conglomerate focuses on three main areas; industry, energy, and healthcare. Peter Löscher, Siemens Chief Executive Officer since July 2007, told African Business Review why its African operations are so important – and how it is on a mission to improve life on the continent.

What do you think are Siemens’ biggest challenges in Africa?

We’ve been doing business in Africa for more than 150 years - so there are only few companies that know this continent, this market and the people better than we do. And we see many chances – both for Siemens and for Africa. Africa’s economies bear massive growth opportunities. It’s no wonder that the market is becoming more and more competitive. Siemens is investing more than €200 million by 2012 in the continent to support and participate in Africa’s growth. However in some places we face challenges like shortages of highly skilled labour or issues which are influencing the climate for investments and entrepreneurial activities.

How would you say you are helping to develop Africa’s infrastructure through your operations?

Africa's urbanisation rate is one of the highest in the world. The number of people living in Africa’s cities will almost doubIe by 2030 to more than 750 million people, and by 2050 there will be more than 1.2 billion African city dwellers. This means massive challenges for cities and mayors – and this is where we can help.

Siemens’ new sector ‘Infrastructure & Cities’ provides tailored green, energy efficiency solutions for private and public infrastructures – such as intelligent building networks, intelligent power grids and integrated mobility solutions. This setup is unique. None of our competitors has something similar for cities, both in terms of organisation and portfolio.

In addition Siemens has commissioned an analysis and a ranking of 15 major African cities in terms of sustainability and environmental challenges. The so-called African Green City Index will be published at the end of 2011, and the results will give city administrators a good idea where infrastructures can be improved.

As Africa is an emerging market, how does Siemens’ business strategy here differ to that in continents such as Europe or North America?

Africa is important for Siemens. Our organisation is widespread, Siemens Africa covers more than 50 countries and we have a permanent local setup in 13 African countries, we run nine manufacturing sites and we employ more than 3,000 people. Our business strategy in Africa is clearly based on aggressive growth. Today our annual order volume in Africa is about €1 billion and, as mentioned previously, we want to triple that volume by 2012. In order to reach this goal, we are investing about €200 million by 2012 to further expand our business throughout Africa. Among others we are establishing a centre of competence for wind power in South Africa that will serve not only the local market, but the whole of Africa and the Middle East.

Could you tell me a little more about how Siemens helps Africa to overcome challenges relating to industry, energy and healthcare?

Although Africa is rich in natural resources and has excellent natural conditions for wind and solar power, some 560 million Africans currently have no access to electricity. We need to change this. Many African countries have set ambitious targets for renewable energy – and Siemens is a perfect partner. We do not only produce the world's largest and most efficient clean gas turbines, but we’re also the world’s number one for offshore wind energy and a technology leader in solar power. In addition we are leading when it comes to efficient power transport and distribution.

What other challenges do we see? Experts estimate that up to $30 billion needs to be invested to meet the demand for healthcare in Africa between 2005 and 2016 alone. We understand that our healthcare customers in Africa want products that are different from those sold in Europe, products that are easy to use, easy to maintain, reliable and affordable. They are the kind of products we offer to Africa. Moreover, more than 300 million Africans lack access to drinking water, and countless people die each year from preventable waterborne illnesses. Our SkyHydrant system cleans drinking water without electric power or chemicals – at annual costs of less than €20 cents per person per year. People in South Africa, Kenya and Uganda are already drinking water from this system.

Are there any plans to expand into more African countries?

We want to grow in Africa. Thus we are always looking for new business opportunities. For instance there is huge potential in Ghana, where we currently already do business and where we are also evaluating our plans for investing and further expanding in the country.

Which African countries would you say you are most developed in?

If you talk about countries leading the pack you surely need to name South Africa. South Africais the continent’s biggest economy. It can help unite Africa and play a leading role in developing green policies to ensure continued economic and infrastructure development, while protecting the environment for future generations. However I think Africa in general is becoming more and more attractive.

How do you find recruitment in Africa? Would you say that it is harder to recruit highly trained staff here than in other territories?

Engineering is always a scarce skill, not only in Africa but in most countries around the world. Nevertheless it would be good to have an even bigger pool of talents to tap into. That’s why we act and invest heavily in skills development within our company and in schools and universities to help fill our talent pipeline. For example, in Mvezo, a remote village in South Africa, together we are helping build a high school for 700 children that focuses on science and technology education.

In your time as CEO, how would you describe the developments in the technology industry as a whole and in Africa specifically?

Green solutions have become growth drivers for the global economy and climate change will transform green technologies into the leading industry of the 21st century. Recently, South Africa's Economic Development Minister (Ebrahim) Patel said that preliminary research showed that almost 300,000 jobs could be created by green technology in the next few years.

Governments and cities all over the world have already started to invest heavily in climate friendly solutions – and at the end of this year, the United Nations will hold the 17th Climate Conference in Durban. I hope it will be a great success. Those green solutions I mentioned will become even more affordable due to intense research and development.

Actually though, the price for a product is not the only thing that counts. What you really need to take into consideration are the costs for the complete product lifecycle. Ninety-five percent of the overall costs for electric drives derive from electricity costs and the actual purchasing price only accounts for 3 percent. The latest generation of energy efficient electric drives consumes 45 percent less energy - this bears a huge savings potential. The same is true for houses and offices, with 80 percent of the overall costs for buildings are allocated to maintenance.

Look at power plants, too. Our latest combined-cycle plant with our world record turbine has a unique efficiency rate of over 60 percent. A US customer in Florida bought six of these clean new turbines and has a positive net saving effect of about US$1 billion over the whole life cycle. Because of the low gas consumption these gas turbines. Sustainable products like this are not only good for the customer’s wallet but also for the environment as CO2 emissions can be reduced significantly.

What would you identify as the most important factors for maintaining a successful business model in Africa?

It is about sustainability and a reliable commitment to long-term partnerships. We have been side by side with our customers for decades, centuries even. We’ve been in South Africa for more than 150 years, in Tunisia for more than 80 years, Morocco for 55 years and Nigeria for more than 30 years. Next year, Siemens Algeria we will be celebrating 50 years of being in business.

Overall we are engaging with governments on all levels, with non-governmental organisations (NGOs), with local suppliers and with local champions. We are providing training for local customers and employees. At Siemens our motto is: we are here in Africa for Africa.