Carlow-based engineering firm BMA GeoServices is set to double the size of its operations in South Africa after securing a major coal mining exploration contract.
The geological consultancy firm will earn 20 million South African rand (€2.1 million) over three years under the agreement with NewCoal, the country's fourth-largest coal mining group.
Bernard Murphy, who founded BMA GeoServices 10 years ago, announced details of the contract yesterday on Enterprise Ireland's trade mission to South Africa, which is being headed by Minister for Enterprise Trade and Employment Micheál Martin.
The Irish company will provide geological, environmental and geotechnical services to NewCoal in 146 licensed sites in Mpumalanga and Limpopo. The South African firm was recently set up under the country's Black Economic Empowerment (BEE) scheme by a number of local mining giants, including Anglo-American and Billiton.
BMA GeoServices has been operating in South Africa since 2001, and has interests in Angola, Namibia, DR Congo and Cameroon. In June 2005 the company set up a subsidiary firm with five staff in South Africa - a country Mr Murphy described an attractive investment location, given its "natural resources, stability and economic maturity".
"It's very exciting for us to be here. It's a very dynamic country and I think the pace of development is accelerating," he said. "We can also use the country as a base for further expansion into Southern Africa."
The company's local experiences are a telling example of the pluses and minuses of investing in South Africa. Mr Murphy said stringent exchange controls meant it was difficult to get funds into the country. "We have not tried to get them out yet," he added. There was also a "very confused picture" around BEE obligations. The black empowerment initiative, which seeks to redress some of the injustices of the apartheid era, places certain obligations on companies operating in South Africa - including, in some instances, quotas for black shareholding.
Mr Murphy said "the intention is that our ownership structure would change" to allow for staff to have a stake in the local company. In the meantime, BMA GeoServices was meeting BEE requirements by facilitating charities in the provision of water for poor communities, specifically by supplying its services "at cost".
Mr Murphy said new legislation was needed to ensure everyone "knew the rules" on BEE. "In some areas, they make up their own rules."
Like many other foreign companies, the firm has lost tenders because of the uncertainty surrounding the issue. Some local administrators have equated BEE exclusively with black ownership, and consequently demand that all investors demonstrate a suitable black shareholding.
Mr Murphy said this "presents a difficulty for Irish firms" because it meant they almost had to "cross the hurdle" of finding a local partner before they started operations. "It's critical to find a good local partner; that is the key to success [ in South Africa]," he added.
