Abba: Man-made problems make manufacturing excruciating
Managing Director of VEETEK Group, an Enugu-based electrical equipment manufacturing company, Mr. Vita Abba, spoke to LAWRENCE NJOKU on the challenges of local manufacturing, especially in the South East.
• Agencies Meant To Protect Local Industries Are Not Doing Their Jobs
Sourcing for raw materials has been an issue for most indigenous manufacturers. How are you grappling with this?
Our raw materials are sourced wholly from outside the country. This is because, the Nigerian petrochemical industry, where we should source raw materials from is not working to its full capacity, otherwise it should be able to produce resins, which are by-products of petroleum products. If it is producing at full capacity or designed to produce resins, it should not be a headache for us to source our raw materials within the country, and consequently preserve our foreign exchange. I can tell you that in this country, over a billion is spent weekly on plastic raw materials, because they are all imported mainly from petrochemical companies in America. We also use additives, which we source from countries like South Africa. It has not been easy because of the complications that characterise the process.
For instance, when you indicate interest in importing, you are mandated to obtain certification from the Standards Organisation of Nigeria (SON). Thereafter, you process your documents and proceed to bring in your raw materials. By the time you complete the documentation here, SON will issue you with certificate of compliance, but when you want to clear your goods at the port, NAFDAC shows up saying that you have no certification.
An ordinary man in the street has been told that NAFDAC takes care of things like drugs and foods, but for industrial raw materials like resins, NAFDAC will still insist that you have to get certification all in a bid for them to make money off you, and also delay you for days. If you complain to SON that NAFDAC is holding on to your raw materials, they will ask you to go to court. It is always a very frustrating experience. It takes a week for a container to be cleared from the wharf, because a lot of them are queuing, and it also takes days for the truck to come out of the wharf, even after it has been loaded.
In Enugu here, we spend over N300, 000 to ferry goods to Lagos, and it costs a minimum of N600, 000 to hire a truck to bring your raw materials down to Enugu from Lagos. These are some of the reasons why manufacturing in this country is very excruciating.
In this kind of environment, what do you do in order to stay afloat?
When you talk of breaking even, you are talking of passing the bulk of the burden to the end user. Here, you see a situation, where the prices of goods are no longer stable because there are so many man-made problems that are created, which end up forcing the prices of the commodity beyond the reach of the common person.
So, how do all of these affect patronage?
I can say for my sector, our products are being patronised because Nigerians have come to know that locally manufactured electric cables, panels, PVC, PVC conduit pipes among others are usually of high quality and better than those that are imported from China. Nigerian made cables have been tested and affirmed to be of very good quality. However, I don’t think that agencies that are there to protect local industries are doing their work the way that they ought to. As I am talking to you today, the technology that is used to produce PVC pipes is the simplest technology, so there is no reason why anybody from Nigeria should go to China, load containers of PVC pipes, and bring them down here to sell. But that is what we see, and that is why people that are importing finished goods are smiling to the banks.
So, let me state that local industries need protection because once we have raw materials, the machines are everywhere to produce. However, what I have been asking myself is why Nigerians cannot believe in themselves. The Chinese believe in themselves, and they use their products; Indians believe in themselves and use their products and so do many other countries. I agree that no country is an island unto itself, but if we are producing goods, why don’t we patronise what is produced in our country? Why would agencies of government that should protect local manufacturers fail to do what they are set up to do? This is the only way we can grow, even if what we produce is not perfect. It is only through criticism, feedback from the consumers that we can improve and with that we can grow and join other industrial nations. We cannot grow in the classroom.
In specific terms, how have these government agencies failed to protect local manufacturers?
They have failed to make the business environment healthy and enjoyable. Take for instance what people at the wharf are doing. NAFDAC has no business asking somebody importing industrial materials to produce his permit, but that is what is happening. Agencies manning our wharf should be able to sit down and streamline their operations to avoid this double taxation, which most local manufacturers are being subjected to. It is killing our businesses.
All over the world, there are agencies that handle specific roles and this is what our regulators have failed to understand. Now if you go through the hurdle of clearing, you have to wait for several days for the goods to be delivered to you and all these are adding to your operational costs.
How are local manufacturers coping with the high exchange rate?
This is another challenge that we have to grapple with. The prices of what we produce are very unstable because our exchange rate will always affect the market price. Take for instance, where a dollar goes for N40 this week and probably N45 next week. What it means is that there is additional cost that will be reflected in the price of the commodity through importation. That is the only way you can cope. For us, because we are known in the market, it is easier for us to source at officially approved rate than those, who are new in
the market. When things are hard for manufacturers, it trickles down to the end user. In terms of price, it is very irregular and determined by market forces, especially supply even when nothing changes in terms of technique and quality.
How about infrastructure like roads, power and even policies of government?
It is a household problem that power has remained all the time very low and unreliable. If you are watching television and power goes off, you shout because you have been inconvenienced. But the difference in the industrial sector is that when power goes off, you incur real losses. If you think of using gas to run a factory, then you will close shop before your time. The problem of infrastructure has been there and none of our policies have effectively addressed the challenge.
What I expect this government to do is to encourage industrial zones. If you have industrial zones, power, potable water, Internet should be dedicated to such facilities. There should also be good roads network. A situation where industrial zones are not working efficiently because they are without all these will ultimately impact negatively on industrialisation in the country. We are graduating idle young Nigerians because we don’t have plans for them. I don’t expect everybody to go to MTN, GLO or even NNPC to work. There should be industries not more than a few kilometres away from each other so that young people can be gainfully employed. That is how China was developed. It is the social responsibility of the government to rethink creating industrial zones, and they should be industrial zones that are effective because of availability of facilities.
Are there peculiar challenges that manufacturers in the South East are experiencing?
It has been awful to survive down here because of a combination of several factors, which include some of those earlier mentioned. In addition to those are issues of double taxation, unfriendly policies from government, bad network of roads, power challenge and what have you.
For instance, there is only one power distribution company in the zone, and what it distributes daily is grossly insufficient to run companies that are located there, and that leads to heavy reliance on power generating plants.
There is also the problem of low patronage of locally manufactured goods, and even little encouragement from government as many key players in government do not even believe in local manufacturers.
The South East, which has always cried about marginalisation by the Federal Government, has always been canvassing for equality and the creation of a level playing ground. But sadly, there are no good roads or rail lines here. We are producing goods in this part of the country, which people in the North, West and various parts of the country can use. If you go to Aba, the shoes they produce there can serve the West African region; but how do you move them? Who is there to promote it and encourage you? These are the kind of challenges that local manufacturers in the South East are subjected to.
So, it is important for the Federal Government to realise that because of our entrepreneurial nature, we need to be encouraged for the country to grow. And the government can do this by looking at these factors that hamper people of South East from realising their manufacturing potential. We have had so many industries that have closed shop less than two years after commencing operation. There are many others that have not taken off at all, not because their owners are not willing, but because of the unfavourable business environment, which is why some of our people still prefer to invest outside the zone.
We are in a zone, where there is no seaport, so we pay heavily for shipment of our goods from Lagos or Port Harcourt. The only international airport in the zone is the Akanu Ibiam Airport in Enugu, which has not fully been internationalised.
The Owerri Cargo Airport is left in the hands of the state government and that will make it remain a local airport for a long time. Federal roads from Enugu to Port Harcourt; from Enugu to Onitsha, and Abakaliki as well as, other neighboring areas are in a terrible state. So, if you elect to move your goods by road, you end up spending several days doing that. With this kind of scenario, you can see that industrialists in the zone are taking the risk of their lives to ensure that there is something that the zone is known for.
So, it is important to point out that allowing investors to source for all the things they require to go into production does not help our growth.
Given the right environment, how profitable is doing business in the country?
Nigeria is a land of several opportunities and anybody in any genuine business is bound to grow and expand because we have one serious advantage, which is our population. All things being equal, if our infrastructure challenge is addressed, local manufacturers would serve the society better. We would not have reasons to find jobless graduates in our midst. It is a pity
that talents are wasting in this country. It is worse in the South East, where lack of infrastructure is killing skills and talents, as well as, the drive to compete with other industrialised nations of the world.
Don’t you think that time has come for South East governments to pull resources together and develop the abundant skills and improve manufacturing in the zone?
In practical sense, government is not meant to be doing business, but to create the enabling environment and make policies that should further businesses. I expect them to buy equities and not to head businesses. Over time, some big business outfits in the zone, including Nigercem, Ceramics, Adapalm, Niger Steel and what have you are no longer working because government is not a good manager of resources. It has been proven over time that succeeding governments have their agenda and this is why businesses operated by governments are crumbling.
My worry is that despite our people doing their best to set up local manufacturing, we have little support from government. There is need for government to drive home the Made in Nigeria mantra in such a way that various zones are affected if we must grow as a nation.