Rising to the challenge
As a continent lacking in much of the basic infrastructure essential for business, Africa could be seen as too challenging for some. But for those companies in the infrastructure sector, the market is wide open, as Likusasa has discovered. Becky Done reports.
Headquartered in Mauritius but with offices in Johannesburg and the other African countries where it is active, LikusasaÔÇÖs primary focus is on the rolling out of distributed infrastructure including distributed power and mobile telecommunications networks in sub-Saharan Africa.
 
Established in 1995, the company was actually the telecommunications division of international contractor Kentz until the middle of 2007. ÔÇ£At that time, telecommunications wasnÔÇÖt really its area of focus,ÔÇØ explains Gerry Shields, a director and co-owner of Likusasa. So Shields partnered with Gary Staunton, now also co-owner and director, to buy out the company. The pair now own and run the business as it is today. ÔÇ£After the management buyout, we were very successful in diversifying the company and in growing it in a way that we believe is going to be quite sustainable,ÔÇØ says Shields.
Today, the company counts such major names as MTN, Vodacom, Eskom and France Telecom among its many clients, working with them on telecommunications, cable networks and related infrastructure projects in countries across Africa, including Ghana, Nigeria, Congo, Cameroon, Angola, Zimbabwe and Zambia.
Since telecommunications in Africa are still vastly underdeveloped, that particular market has proved relatively resilient in the face of global recession, meaning Likusasa has been able to maintain its strong growth rate. ÔÇ£WeÔÇÖve been fortunate to be in that marketÔÇöit has been very buoyant even during this downturn,ÔÇØ explains Shields. ÔÇ£WeÔÇÖve been able to grow organically and develop a very strong track record in the industry. We havenÔÇÖt looked at acquisitionsÔÇöit simply hasnÔÇÖt been necessary in our development of the company. But we have been looking at growing our service offering into other industries within the infrastructure sector, such as renewable energy.ÔÇØ
Renewable energy in Africa is a potentially huge market, says Shields. ÔÇ£Development in Africa is going to require investment in power, and I think part of that investment will be in the renewable sector,ÔÇØ he says. ÔÇ£And with the model weÔÇÖre looking at, renewable projects, certainly in the telecommunications sector, can generate payback in two to three years. So we see that as producing a lot of opportunities for us in the future.ÔÇØ
Mobile phone base stations are one segment of the market that could benefit massively from the application of renewable energyÔÇöand thereÔÇÖs no shortage of them. ÔÇ£ThereÔÇÖs an enormous amount of diesel-generated power being used to run base stations,ÔÇØ explains Staunton. ÔÇ£There are tens of thousands of these base stations all over Africa running on diesel generators and the cost to deliver the diesel is so excessive that itÔÇÖs actually becoming commercially viable to explore renewable energy solutions. Renewable energy to date often hasnÔÇÖt made commercial senseÔÇöbut in Africa, it does make commercial sense,ÔÇØ he says.
So, opportunities abound; but doing business in Africa still poses operational challenges. With around 150 core employees and a further 500 contracting staff on its books, the number of expatriates working for Likusasa varies depending on the country of operation, because of its focus on localisation. For example, in Cameroon, a reasonably mature operation, there is only one expatriate on the team, while in Zimbabwe, a very new operation, the number of expatriates is unusually high. The company always aims to ensure that locals are in the majority; however, skills remain an issue. ÔÇ£I think one of the most significant operational issues that we face is the very low level of skills and literacy in these countries,ÔÇØ explains Shields. ÔÇ£It requires quite a considerable amount of training to get our local skills base up to a level that we find acceptable; however, we have always been very successful in doing so.ÔÇØ
As well as aiming to increase local skills levels in the regions where it works, Likusasa also works with its clients to engage with local communities in other ways. ÔÇ£We collaborate with our clients on the development of social projects, which tends to mean better results than if we attempted them on our own,ÔÇØ Staunton comments. ÔÇ£We built a school with MTN in Cameroon very recently and this was a fantastic projectÔÇöone that we were very proud to be involved in. It was very well co-ordinated by MTN and it really did have a huge impact on the local community,ÔÇØ he says.
Though the recession has had a negligible effect on the telecommunications market in the country thus far, Shields acknowledges that the climate is starting to shift slightly. ÔÇ£I suppose we are starting to see some signs now that cost pressures are impacting on our clients and some of the projects are being curtailed; but nonetheless, itÔÇÖs a very large market that has been only marginally affected to date. We are starting to see some signs of slowdown and our clients are more mindful than ever of their capital expenditure programmesÔÇöthe result of that is that thereÔÇÖs likely to be a lot more competition entering the market. WeÔÇÖve seen a lot more Chinese contractors supplying equipment and undertaking turnkey contracts and we try to respond to that by becoming a contractor to the Chinese main contractors.ÔÇØ
The Chinese approach could serve as a useful model for other companies seeking to do business in Africa, says Staunton: ÔÇ£I think the way the Chinese have approached Africa is very interesting. TheyÔÇÖve been quite successful and itÔÇÖs very commendable what theyÔÇÖve done and what theyÔÇÖve achieved. We actually work with many Chinese companies nowÔÇötechnology companies in particularÔÇöand their attitude towards us is very good. They provide very competitive financing. ItÔÇÖs a good example for other nations to consider how they approach Africa.ÔÇØ
The future certainly looks bright for Likusasa; but ironically, the source of the companyÔÇÖs success can often be a source of frustration as well. ÔÇ£The biggest challenge we have [within the business] is actually in communications,ÔÇØ says Shields. ÔÇ£The cost of communications in Africa is very, very high. We need good internet connectivity and good voice communications to run the business and thatÔÇÖs a challenge. Even though there is large investment in communications in Africa, the quality is still very poor.
ÔÇ£ItÔÇÖs a fundamental problem in terms of doing business in Africa,ÔÇØ he admits, ÔÇ£though the fact that the problem exists is actually good for us, because it means we still have plenty of work to do!ÔÇØ
