General Electric Foresees 2B Investment in Africa by 2018 - Analyst Blog


Diversified conglomerate General Electric Company ( GE ) recently offered an overview of its long-term investment plans in Africa on the eve of President Obama's address at the U.S.-Africa Leaders Summit 2014 in Washington, DC. The Summit, hosted by General Electric, is likely to be attended by several African and global government officials, policy experts, NGOs, entrepreneurs and business leaders for a conference on investment, innovation and infrastructure in the region.  

Why Focus on Africa?

Over the years, General Electric has played an integral part in the development of the region either through strategic partnership with diverse firms or through indigenous efforts. These include infrastructure developments for easy access to basic amenities and improved facilities for an overall upliftment of the socio-economic life.

Backed by prudent investment decisions, Africa has yielded $5.2 billion in revenues in 2013 to emerge as the most promising growth region for the company. In addition, General Electric also procured over $8.3 billion in orders last year across Africa to justify the continued faith the conglomerate had on its money-vending capabilities.

GE Commitments

In order to have sustainable growth in Africa in a mutually beneficial relationship, General Electric intends to focus its investment on three strategic areas: infrastructure development; localized solutions; and capacity building. To achieve these objectives, the company remains committed to supply aeroderivative gas turbines in Algeria and Nigeria to improve grid reliability during peak demands and generate uninterrupted power. The Distributed Power business of the company further extended its commitment to bring online 5,000MW of new electric generation capacity across six countries in association with the regional private and public sector players.

General Electric's "Country-to-Company" agreement with the Government of Nigeria will continue to develop infrastructure projects while transferring skills and technology to local talents. The company will also supply $650 million of energy equipment and $350 million worth of railway machinery to Angola. (Read: GE to Supply Angola $1B Rail & Energy Equipment ). At the same time, General Electric will invest $20 million over the next five years in health programs in Nigeria, Kenya, Ghana, Rwanda, Uganda, Malawi and Tanzania in order to improve the healthcare facilities in these African countries.

Strategic Investment Areas

Infrastructure development in Africa is one of the primary strategic investment areas of the company and represents a $90 billion opportunity. General Electric generates a quarter of Africa's gas power, and nearly 70% of the electricity distributed across Algeria. Moving forward, the company has an ambitious plan to build technical expertise and infrastructure capacity across various commercial and healthcare sectors in Nigeria, develop Customer Innovation Center for skills development in South Africa, and develop and expand off-grid power solutions in Ethiopia, Ghana, Kenya, Liberia, Nigeria, and Tanzania.

The company has even tweaked its global offering to obtain localized solutions. In order to ensure a holistic development through capacity building, General Electric offers skills and hands-on training through partnerships with local governments, schools and hospitals. These, in turn, create a pool of local talent and improve their work placement opportunities, thereby benefiting the overall economy of the region.

Moving Forward

Over the last couple of years, General Electric has expanded by about 15% each year in growth markets. During the last reported quarter, orders from growth markets were up 6% as six out of nine regions witnessed revenue rise. The company also expects huge infrastructure orders to the tune of $10 billion in 2014 from Latin America on the back of surging demands for improved facilities for basic amenities and well-being. (Read: GE Envisions $10B Infra Orders from Latin America ).

General Electric presently retains a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include Federal Signal Corp. ( FSS ), China Merchants Holdings (International) Company Limited ( CMHHY ) and CLARCOR Inc. ( CLC ), each of which carry a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: GE , CLC , FSS , CMHHY

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