Increasing local content in purchases by government departments and State-owned companies is viewed as a key pillar of South Africa’s reindustrialisation efforts. But the head of GE Transportation Africa, Thomas Konditi, believes the initiative could be augmented through the creation of a framework that incentivises multinationals to integrate South African products into global supply-chains not directly associated with a specific procurement programme.

The American group is already considered a leader in delivering on localisation commitments, having steadily increased the South African content of the locomotives it has been supplying to Transnet Freight Rail (TFR) since 2009.

Local-content commitments have risen from around 30% following TFR’s first order of 100 GE Class 43-000-type C30ACi diesel-electric locomotives six years ago, to over 55% when GE was awarded a R7-billion contract in early 2014 for supply of 233 Evolution Series GE ES40ACi locomotives.

The most recent contract formed part of TFR’s larger R50-billion contract for the supply of 1 064 diesel and electric locomotives by 2018. The orders have been placed with four suppliers, including General Electric South Africa Technologies (GESAT), China South Rail Zhuzhou Electric Locomotive, Bombardier Transportation South Africa and China North Rail Rolling Stock South Africa. GESAT, comprising GE and the Mineworkers Investment Company was established in December 2008 as the empowered platform for the delivery of locomotives in South Africa.

The first six Evolution Series locomotives have already been delivered to TFR, with the initial units having been built in the US. The balance, however, will be assembled at Transnet Engineering’s facilities in Koedoespoort, near Pretoria, over the coming two years.

GESAT and Transnet have also entered into an export alliance, through which locomotives will be assembled in South Africa for export into the rest of Africa. Under the aegis of the alliance, ten GE C30ACi locomotives have been sold to Caminhos de Ferro de Moçambique, the Mozambican railways utility, while 16 have been leased to Thelo Rolling Stock for use by Vale, also in Mozambique.

In addition, the Londvolota Trust (meaning ‘to preserve’ in Swati) has been established to spur further supplier development as part of a larger R700-million commitment aimed at supporting innovation, enterprise and skills development in South Africa.

Work is also under way to create a customer innovation centre in Rosebank, Johannesburg, where young engineers and technicians will be put to work to adapt GE technologies and solutions to African conditions. The R500-million centre should be up and running by mid-2016.

Nevertheless, Konditi believes South Africa’s localisation architecture could be broadened to manufacturing subsectors not directly associated with the locomotives order, arguing that the current prescriptive approach may not be delivering the best results.

GE, he notes, may purchase $500-million in relation its South African contracts, but it buys $50-billion-a-year for its global supply chain. “If all you do is focus on what a multinational is doing in the country, you are limiting yourself by a factor of 100.”

Konditi’s knowledge of the GE supply chain arises from having worked for various group companies in 30 countries since 1994. Originally from Kenya, he read for an engineering degree and a Master of Business Administration in the US and has experience in various sectors, including financial services, plastics and telecommunications.

“Sometimes the prescriptive approach doesn’t yield as much of an outcome as would be the case if you prescribe the end result rather than the process for getting there,” he explained in a recent interview with Engineering News Online.

“Prescriptively I need to deliver a certain percentage of my contract in local procurement. Yet, GE buys 100 times that volume in its global supply chain. So instead of forcing the development of supplier X for contract Y, it should be possible to count anything you buy from an industrial supplier in South Africa for your global supply chain as a localisation credit.”

Such an approach could offer South African manufacturers access to long-term sustainable contracts and facilitate an improvement in their global competitiveness.

“South Africa’s supply-chain needs to be globally competitive if you want to be globally relevant,” Konditi avers.