The South African unit of global technology group ABB is poised to investment R216-million over the coming three years to significantly expand its Alrode manufacturing facility in a bid to position the factory for rail opportunities emerging across Southern Africa.

CEO Leon Viljoen reported on Thursday that the investment was receiving support from the Department of Trade and Industry (DTI) under its R5.8-billion Manufacturing Competitiveness Enhancement Programme (MCEP).

MCEP is a competitiveness-raising incentive scheme that has been created to support the DTI’s Industrial Policy Action Plan, which is itself geared towards stemming deindustrialisation and reviving South Africa’s embattled manufacturing sector.

Speaking at the company’s annual results presentation held at ABB South Africa’s head office in Ekurhuleni, Viljoen lauded the incentive, which would be used to help it upgrade and expand its capacity to supply traction motors, transformers and converters.

He described the incentive, which was set to cover about 25% of the investment costs, as a concrete example of government’s growing support for local manufacturing and indicated that the group was also considering other localisation opportunities, particularly in the renewable-energy sector.

The larger ABB Group recently acquired Power-One, a leading global manufacturer of solar power inverters. “We will localise the production of inverters when the orders start coming in,” Viljoen said, indicating that the investment could also find MCEP backing and would most likely also be located in Gauteng.

But the already approved capital expenditure was geared primarily towards positioning the company to offer rail original-equipment manufacturers (OEMs) with a full South African “propulsion-system package”.

“Transnet Engineering has publically stated that they are interested in becoming an OEM for Africa. We see ourselves tying up with them and partnering,” Viljoen added, noting that ABB was currently the only propulsion-system supplier not in competition with other OEMs following its exit from the locomotive manufacturing business a few years ago.

The South African business was also bullish about the prospects for growing exports on the back of strong infrastructure growth in sub-Saharan Africa, as well as the weaker rand.

In 2013, export orders accounted for 14% of overall orders of R5.3-billion. However, the outlook was for the export component to rise to between 18% and 20% in 2014, with ABB South Africa’s order backlog currently standing at R3.7-billion.

Cross-border growth was expected to be underpinned by government infrastructure programmes, as well as ongoing mining investment in the rest of Africa, where the regulatory uncertainties were lower than was currently the case in South Africa.

Viljoen reported particularly strong demand from Zimbabwe, but stressed that it had an on-the-ground presence in 12 Southern African countries, which were all showing strong growth momentum.

Besides rail, renewable-energy and mining prospects, ABB expected continue strong order flow from the power transmission and distribution sectors, including from Eskom and South Africa’s large metropolitan councils.