Procurement of local companies an emerging trend

26th April 2013 By: Gia Costella

The acquisition of resource- and infrastructure-focused project house TWP by global technical, project and operational services provider WorleyParsons last month will have several significant benefits, WorleyParsonsTWP COO Digby Glover tells Mining Weekly.

“In the past, consulting engineers were technical experts providing government or private industry with specialist skills that were not necessarily in-house to those businesses. It was purely an engineering and design professional service offering.

“Over the past 15 years or so, the mining industry, in particular, has been witness to the transition of the consulting industry into an engineering, procurement and construction management (EPCM) service provider, which is a far broader provision of services than simply consulting engineering,” says Glover.

He notes that TWP has been deliberately diversifying its offer- ing and its markets for many years and has been relatively successful in achieving this objective.

“The acquisition presented the right opportunity to build on this success. TWP will now become known as WorleyPar-sonsTWP, following the R900-million acquisition of TWP Projects by WorleyParsons, which is listed on the Australian Stock Exchange and is the fourth-largest EPCM company in the world.

“It also enables us to leap into a position where we have access to a global market and a combined capability of serving this market,” states Glover.

He notes that the global engineering industry can be volatile at regional level and this is an advantage if a company has access to multiple markets, as this can assist in evening the workload.

“The South African mining industry, over the last ten years, has gone from relative lows in the early 2000s to chaotic highs in 2008, during which the South African EPCM industry grew and matured. “From 2008 to 2010, there was a dramatic cutback in the mining space, followed by a rapid growth again to mid-2012.

“Currently, the global mining industry is experiencing some contraction as a result of global economic issues, and the South African mining industry has been further affected by the political and social issues of the past year. In the short to medium term, growth will require expansion into wider markets,” says Glover.

He notes that it has become necessary for EPCM businesses to have sufficient scale and diversity to allow deployment of resources, where required, within the mining industry, its subsectors and relevant allied industries.

“The combination of TWP’s and WorleyParsons’ existing capabilities provides a more compelling offer for all mining companies, but particularly the major multinational companies, which require larger companies to carry out their large-scale jobs,” says Glover.

He adds that, with just more than 2 200 employees in South Africa, the new entity provides an enhanced business framework for the companies.

Glover explains that geography is another important aspect that WorleyParsons brings to the company.

“Political, social or environmental issues can significantly affect a market in a country or region at any point in time. It is a real advantage to have access to multiple regions.

“WorleyParsons’ presence in over 40 countries gives us increased geographic spread and credibility. The reality is that, unless you have consistent growth as an EPCM company, you will find it difficult to attract and retain the capacities required,” he says.

The procurement of local companies by international businesses is a trend that will continue in the industry, says Glover.

“There will be a continual drive by major service providers to acquire skills sets. There is a lot of interest in South African companies from international companies, as they have desirable expertise – South Africa is regarded as a portal into Africa, which, despite the continent’s social and political problems, always has potential – and, relative to our peers on a global scale, South African businesses are inexpensive,” he states.

Future Plans

Going forward as WorleyParsonsTWP, Glover says, there is a clear intent to integrate TWP’s business into the current local WorleyParsons South Africa business.

“The intention is to align ourselves with the global WorleyParsons business and to provide the local market with our broadened suite of skills. WorleyParsons South Africa is an established EPCM provider in the hydrocarbons, power and infrastructure sectors, but only had a small presence in mining. With TWP’s focus on mining, we have complementary capabilities with limited overlap.

“The idea is to bring all these skills together to offer the industry a complete solution and leverage this comprehensive service not only in Africa but also worldwide,” he explains.