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Financial Standard - Business News
General Electric to invest billions in Kenya
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Last Updated on June 5, 2007, 12:00 am
By Kenneth Kwama

Safaricom is a giant by regional standards, but it took all of six years to get that way. Now, barely two years after opening their first corporate office in Kenya, General Electric — the world’s second largest company — is planning to announce the creation of what could be the region’s biggest company in one massive investment.

This follows an act daring in the first quarter of this year by a committee set up to investigate possible areas of investment in Africa. A few months ago the committee approved the setting up in Kenya of GE’s largest and most capital-intensive venture in the continent, marking a turning point in the company’s investment policies.

Last week, GE’s President for Africa region, Mr Yibrah Tesfazghi, confirmed that GE, previously hesitant to invest in Africa because of "instability and insecurity", will announce plans to establish a multi-billion shilling manufacturing plant in Kenya by end of this year.

"The plan is to set up a multi-functional manufacturing unit that can churn out a number of products," Tesfazghi says.

"We are still looking at possibilities, but right now, the plan is to set up a unit that will manufacture health imaging equipment and locomotive parts." The planned factory is expected to be operational within the next three years.

Huge investment

GE sold its advanced material business for $3.8 billion (Sh258 billion) last year. Part of the company’s investment in Kenya, is expected to come from these proceeds as the company said it would reinvest this capital into faster growth platforms, including Africa.

"We have not chosen the (factory) site yet, but we are looking at three locations," says Tesfazghi, an Eritrean national. "We want to set up in a place with good transport network, stable energy supply and where we can easily access the Mombasa port because most of the materials to be manufactured will be for export."

GE is a diversified technology, manufacturing and services company. In countries where it operates, its businesses are conducted through a direct presence, joint ventures, strategic alliances and a wide network of distributors. The company has six strong businesses, which span infrastructure, healthcare, commercial finance, GE money and industry.

Last year, the company had consolidated revenues of $163 billion (Sh11 trillion) about seven times Kenya’s Gross Domestic product for the same period. Only oil giant Exxon Mobil earned more last year ($378 billion) and is larger by market capitalisation.

Through expansion, GE says that it expects its businesses to achieve over ten per cent earnings growth most years, and is projecting long-term returns at 20 per cent. It is the search for these aggressive earnings figures that has brought GE knocking at Kenya’s door with a proposal that will shock foreign direct investment statistics noticeably in the next three years.

New technology venture

Tesfazghi declined to reveal details or figures, but the Kenya Investment Authority (KIA) confirmed that negotiations for GE to set up a major venture in the country are at an advanced stage. Although the details of the amount to be invested are closely guarded, Tesfazghi laughed off a suggestion of Sh100 billion from this writer as low.

"I can’t tell you exactly how much it is because the final decision has not been made," he laughed. "It could be bigger than that because we are the biggest company in the world. We can build a country within one month because we have the resources. For now, just know that the amount is big because when we say we want to invest, we invest."

Last year, KIA records show, there were 70 foreign direct investments in Kenya injecting about Sh80 billion in capital into the economy. The firms employed a total of 16,940 new people, including 434 foreigners and 16,506 locals. GE’s entry will dwarf all these projects in capital terms.

Since the beginning of this year, GE has announced almost $15 billion of industrial acquisitions, including that of a US company called Abbott, which specialises in the healthcare diagnostic equipment business.

This year, GE Healthcare is expected to have $20 billion in revenues and $4 billion in operating profit. GE has particularly been keen to expand the health wing. The company operates medical imaging and information technologies (like ultrasound machines), medical diagnostics and patient monitoring systems, disease research, drug discovery and bio-pharmaceutical manufacturing technologies.

The technology being pioneered is dedicated to early detection of diseases and helping physicians tailor treatment for individual patients.

Two years ago, the company acquired Amersham — then the world leader in the manufacture of equipments used for early detection of disease. The $11-billion deal was GE’s biggest industrial acquisition and gave it the capability for molecular diagnostics. GE has also acquired Biacore International, maker of medical research instruments, for $436 million within the last two years.



Great market potential

If the Kenyan deal goes through, it will rank as the single-biggest investment by a multinational in East and Central Africa. It will also provide thousands of job opportunities and boost Government tax revenue by an estimated Sh10 billion annually.

GE’s proposed factory is set to produce materials for Africa and expand GE’s market in the region. The company’s railways division, which is expected to services its regional customers with products manufactured in the new plant, provides a broad portfolio of rail technology solutions. The division has contracts with major rail utilities in Egypt, Cameroon, Congo, Gabon, Namibia, Zambia, Tanzania, South Africa and, recently, Kenya.

GE Healthcare, the company’s medical division, is already a significant player in Egypt, Tanzania, Zimbabwe, Namibia, Angola, Nigeria, Mozambique, Botswana, Uganda and South Africa where it supplies a large network of hospitals and health institutions with medical imaging equipment amongst other services.

GE’s other bets in the region are already paying off in health imaging and aviation, where it is leveraging new ties with hospitals and airline companies eager to replace old technologies with new ones. Currently, the company’s list of local customers includes Kenya Railways, Kenya Airways and the Aga Khan Hospital. The GE Rail team has been supporting Kenya Railways to improve productivity and efficiency by helping the firm to manage their aging locomotive fleets. GE Rail helped Kenya Railways reduce maintenance costs and increase its performance.

"After the locomotives were overhauled, availability improved from 48 to over 90 per cent and the amount of cargo they were able to transport skyrocketed from 2.8 million to 5.5 million metric tonnes," says GE.

The aviation arm, GE Aircraft Engines, is the world’s leading manufacturer of jet engines for civil and military aircraft, including engines produced by CFM International, a joint company of Snecma of France and GE.

Most foreign direct investment in Kenya is from countries like the United Kingdom, India, China, Germany, South Africa and the US. It is usually concentrated in the service, manufacturing, tourism and agricultural sectors.

"Since the enactment of the new investment Act, the authority has witnessed the entry into the Kenyan market of major multi-national companies such as Nokia," says KIA.

GE’s entry into Kenya comes as other investors lament bottlenecks like high power costs, delays in processing of various permits and exemptions and insecurity. In the past, the company has been able to establish and grow new markets by using its size and unique multi-business structure to build early leadership in the trends that shape future business.

"We believe that healthcare would benefit from demographic forces and Africa is a great market for us," Tesfazghi says. "We know we will be able to generate good returns in future and that is why we are investing."
 

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Go on Kenya, you have a good future ahead of you. I think the economic growth in Kenya is a lot more stable and broad-based than other African nations, though it may be not as high.

I'm sure if Nigeria was more stable the factory would have been located there. I think out of the more developed SS African countries with larger populations Kenya is the most stable (exc SA).
 

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Be aware though, most big-scale developments in Africa never seem to come in fruition- in the last few yrs I have heard of the following in Ghana- giant paper factory, car assembly, TV assembly, manufacturing park- none of them came true and I havent heard anything since.
 

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oh yes i can tell of the story for kenya but it has never been of such a high profile company like GE. if this thing fully goes through then it will be like a trail blazer and i would expect more multi national companies to follow. all we can do is keep our fingers crossed
 

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It is not everyday that what was till recently the worlds biggest company decides to invest in a manufacturing plant. I juts pray this is not false hope. Many an ivestor has been frustrated by lack of infrastructure, corruption and bureaucracy. How is the power situation in Kenya? (I mean electric power btw!)
 

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Be aware though, most big-scale developments in Africa never seem to come in fruition- in the last few yrs I have heard of the following in Ghana- giant paper factory, car assembly, TV assembly, manufacturing park- none of them came true and I havent heard anything since.
but all these came truth in nigeria.
 

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Go on Kenya, you have a good future ahead of you. I think the economic growth in Kenya is a lot more stable and broad-based than other African nations, though it may be not as high.

I'm sure if Nigeria was more stable the factory would have been located there. I think out of the more developed SS African countries with larger populations Kenya is the most stable (exc SA).
Strange coment, why would you be sure that a company would prefer to go to Nigeria over Nairobi if Nigeria was stable. Just wondered because some people on this forum seem to think that one country is better than the rest. Why is Nairobi one of only 4 cities in the world to have a UN headquaters....I respect other countries so it irks me when others seem to think that they are better than my country.
 

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Ok. I want names of the following

1)car assembly plant
2) Television plant
3) manufacturing park
4) Giant paper factory

...that have been constructed in Nigeria over the last few years.
you are just a funny lol.you want the proof of assembly plants in nigeria?...and you shall get it.

all these is been made in nigeia.
1,computers
2,generators
3,many types of cars
4,trucks
5,tractors
6,nyundai boats and ships
7,panasonic and samsung arrived
8,just give me a break...
 

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Strange coment, why would you be sure that a company would prefer to go to Nigeria over Nairobi if Nigeria was stable. Just wondered because some people on this forum seem to think that one country is better than the rest. Why is Nairobi one of only 4 cities in the world to have a UN headquaters....I respect other countries so it irks me when others seem to think that they are better than my country.
it's very close to aid recipients
 

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Great News. Kenya needs to evolve into an Industrial Economy.

Cheers My East African Brothers:banana:
 

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it's very close to aid recipients
the office in Nairobi is UNEP United nations environmental Programme. Nothing to do with aid. it was based on the fact that nairobi was the greenest City in the sun. a model that had to be sold to the world. We have a huge and verry busy airport in northern kenya called Lokichogio. this is where all the aid flies to and is managed from. true there are a few offices in nairobi to deal with aid, but they are there because UNEP was allready there.
 

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the office in Nairobi is UNEP United nations environmental Programme. Nothing to do with aid. it was based on the fact that nairobi was the greenest City in the sun. a model that had to be sold to the world. We have a huge and verry busy airport in northern kenya called Lokichogio. this is where all the aid flies to and is managed from. true there are a few offices in nairobi to deal with aid, but they are there because UNEP was allready there.
how could they v'e had their offices in nigeria,when it is been given nothing.
 

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1st Abuja International Trade fair starts living up to its billing, 2nd Day, as exhibitors turn up with more products, more patrons troop in to the fair venue

Made in Nigeria Limousines drove into trade fair ground.

The 1st Abuja International Trade Fair, started living up to the promise of its organizers second day of the event as more products came to be exhibited with more patrons coming to the fair ground to do business.

Two Made in Nigeria Limousines drove in to be exhibited at the fair ground today, 6th may, 2006. The made in Nigeria Limousines, a Mercedes Benz V-booth which the makers said is the “longest V-Booth limousine in the World” and a Toyota 4-Runner Limousine version which the makers also say is the “only Toyota 4-Runner in World” was actually made in Enugu, by a company based in Enugu State of Nigeria.


The vehicles are fitted with all known luxuries like a DVD/CD player, 14inch Television and refrigerator which is powered by a solar system when the engine is switched off for energy conservation, split unit air condition for the owner’s apartment in the vehicle. Each of the vehicles are not less than 20 feet front bumper to back bumper with a claim that 30 feet length and additional specifications are realizable by the makers.

 

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Why does every thread in this Sub Forum have to be competitive:eek:hno:

Why is Nigeria being more discussed than Kenya.

This is ridiculous. This thread is about a Plant in Nairobi, not an economic debate Thread.

Anyways I don't blame Naija, Popa1980 should have done some research before he made such a strange remark.

Anyways back to the Topic.

Such a move will drastically enhance Kenya's Tetiary Sector:)
 
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