By BIMBOLA OYESOLA
Keith Richards, the Managing Director of Promasidor Nigeria Limited is one of the few expatriates who can speak authoritatively on the state of Nigeria’s manufacturing sector. Having been in Nigeria for almost three decades and most part at the helm of affairs of leading conglomerates, including Guinness Nigeria Plc, where he spent five years, and Promasidor, about 20 years.
In the last five years he took over the mantle of administration at Promasidor, the company has been soaring in profit and other indicators though not without challenges. In this interviews with Daily Sun, Keith Richard bares his mind on the challenges of doing business in Nigeria, including government policies among others. He declared that despite all odds, the company has continued investing in the Nigerian economy. Excerpts.
Assessment of 2012
Last year was a difficult one for manufacturers because of the crisis that trailed fuel subsidy removal and the attendant increase in pump price of fuel. When that was laid to rest, we had the issues of insecurity in the north and flooding that swept through the South East. All that affected our market last year. We are hoping this year would be more peaceful, though there are still nagging issues in some sections of the country. But one good thing is that Nigerians are a very resilient people.
I think the market has settled and this year should be more positive. The early signs are good for us because all our range of products performed very well in January and I was told the packaging company has seen a little more over-booking which suggests that there is a general boom across consumer products.
There is a little more optimism in the air particularly as the demographics are right, the population is there, demand is there, but the question is around micro-economies. If Nigeria’s economy is growing around 6 to7 per cent, the concern should be how much of that trickles down to the ordinary Nigerians? If some of the money that the country is earning from oil, or investment start getting down, it will be a boom market for the milk and other consumer goods. But the big question is how effective is government in ensuring that this revenue trickles down to ordinary Nigerians on the streets, because we know this can stimulate consumption of goods.
How insecurity affects sales volumes
A large percentage of our sales is in the North, because our brands especially those in the N10 and N20 range are very popular there. Also very popular in the North are our Top Tea brand and seasoning products.
It goes beyond what is happening directly, you know because the North is a big trading out-post for export to Cameroun, Chad, Niger even up to Mali.
What happened was that for several months, the borders were closed and even when they were re-opened, there was skepticism about all exports outside the country. The Boko Haram threat and what is happening in Mali makes the security forces nervous leading to serious restrictions of movement at the borders. The other issue is that the North which heavily relies on agriculture had had their lives disrupted by sectarian violence.
A lot of transporters do not want to go to the North anymore. Some want to charge 25 per cent risk premium to go to Maiduguri and that’s costing us more and costing other FMCG money and making it more difficult for farmers and anybody producing to get their goods to the urban markets like Lagos and the south in general. So there is a direct impact that trickles down and affects the economy as a whole. In the north in particular, it’s difficult to measure but it’s definitely there.
Promasidor’s export drive
Well we do export to Benin and neighbouring countries, but you know Promasidor is a group so we have our own business in Ghana and other businesses around that export to some of these other countries. We definitely export to neighbouring ECOWAS states.
There is no doubt about it that consumers want our products but where we are having issues on the ripple effect of insecurity in the economy. For example, even in the South East, fewer people went back home for Christmas last December because of the concern that rising cases of kidnapping was generating. That reduced consumer demands in the region for the period. Interestingly, the seasoning market did very well. Products like Onga seasoning out-performed other brands which is not hard to see. If you have a security concern and you are not going out in the dark, there would be more demand for food, after all if you are not going out to have beer with your friends and you are not going out to ‘Mai shai’ to drink tea what would you do? The average man would stay at home and ask his wife to cook a pot of soup and he will eat at home with his family. That’s good for the seasoning market but difficult for other brands. I mean it’s difficult for the beer market, the soft drinks for those kinds of things that are consumed in places where people are reducing their visit. Lagos is ok but you know if you go to Owerri, Enugu, Aba, the security issue definitely means less traffic at night and less socialising.
No, because I am never satisfied. I learnt from Chief Ralph Alabi that the reward for hard work is more work. Late Chief Alabi, who then was the Chairman of Guinness Nigeria, told me that and I have passed it down to my team. I am always looking for more. I am looking for more from our existing brands and I am looking for how to develop more products, and more brands. I can never rest, the day a company decides to rest is the day it begins to slide, so I am never satisfied.
Nigeria’s macro-economic environment
Well, I think I will split it into two. I think government has the right intent and some very good policies, but, it is not doing well on implementation. Take power for instance, that even Mr. President understands is the backbone for industrial growth. Then look at the way the privatisation is being implemented. The whole thing is just going anyhow, it’s been delayed and I am sure that must be frustrating the President and other members of the cabinet.
I have no doubt that he has the right intent and I really believe that they have the right policies but the implementation is not happening fast enough. The implementation is not meeting the need of ordinary Nigerians, in the area of infrastructure, power, roads, particularly education, health. Simply this government has been earning more money from oil revenue with price high and increased production, but I think the money is not been utilized as effectively as it should be.
Effect of power on Promasidor
Lack of constant electricity is affecting us considerably. The cost of generating alternative power is huge because we spend up to N100,000 per hour on diesel. Again, because gas is now available we have just installed a gas generator that cost us USD1.2 million and the pay back time is less than one year to show you how damaging the cost of power is. It is not the direct cost. If we switch on to PHCN, besides being epileptic, the voltage is unstable, so bad that it does enormous damage to the machines. Machines stop and start that means you get less machine efficiency, you are less effective.
For a company like ours, at least we have the financial muscle and the ability to plan around these shortcomings and do the best we can. But there is no doubt that the government’s intent is to develop the SME, and those other companies that lack the capacity provide alternative power for their operation. There are small businesses that want to produce goods so that we stop importing from China or India but rather than do this, they first have to invest in a generator and get bogged down by diesel headaches and these are the drawbacks that cause the death of SMEs.
This is not affecting only big companies like ours, but ordinary people on the street with small businesses are also affected and there is no doubt that there will be a big boom in the economy if there is more electricity supply.
You know I have referred to transport and that the government understands and the Minister of Finance, Mrs. Ngozi Okonjo-Iweala, has been to the port to make sure that they are run efficiently and we have seen some improvement. But even if you clear your goods quickly, you have just come out of a queue at Oshodi-Apapa Expressway which has gone bad over time due to non maintenance. Rather than maintain the road through which 90 per cent of the raw materials come into the country, what you see is the tension between the federal and the state government over the management of the road.
They are too busy playing politics while all manufacturers are suffering because of the very bad state of that road and poor management and the fact that trailers particularly, fuel tankers block the road always.
They are trying, there is no doubt that the Benin-Ore road has improved. That’s a very important road structurally built in the country but look at the Lagos-Sagamu Expressway, for how long will that contract last given how much we have spent? Now it’s been given to other people. So things are happening and that’s why I said the government has the intent but it is the implementation that is holding everything up.
Well, it has been a fantastic journey for Promasidor. We have so much opportunity in Nigeria and they far outweigh the difficulties we have had in those 20 years. This company has gone through a lot, having been set up in 1993 and has gone through all the problems with democracy in 1995, and yet it has grown astronomically. That is very positive, it shows the possibility and the potentials in this country despite the problems that we have been talking about and it shows that if we fix things, this is a great place for investment. So we are very positive about Nigeria particularly in relation to the long term and that is why we are constantly re-investing.
We are investing money in a plant for new product that will be launched before year end, as well as in research and development. We are bringing technology which will enable us to work with local raw materials. We have signed a Memorandum of Understanding with University of Ibadan where we will take some of their students to France on some sponsored programmes and when they return, they will help us to work on those products developed with local raw materials.
Things have been very exciting here and the great thing is that we do have shareholders in Promasidor that take the long term seriously. They are making investment that will enable us to continue to grow in the long term. So I think the outlook is very positive and exciting. Later this year we will celebrate our 20 years and we will do a lot of things; for example, 460 workers who are celebrating their 10 year anniversary this year would be honoured. In effect, we will be having a great celebration of long service award and we will be celebrating our 20th anniversary for Promasidor and particularly the Cowbell brand in Nigeria.
Local sourcing of raw materials
Well, first, let me talk about agriculture; I think the Ministry of Agriculture is bringing new energy, new insight and a new focus on agriculture which is great for Nigeria. Again some of the policies, and implementation are proving tougher than the minister had imagined.
There is a lot of focus on local raw materials development which is excellent for backward integration. We are planning on our own, but this is not something you can do over night. So the research and development we are doing in the use of local raw materials and we know that some of the technology cannot be used in sub Sahara Africa, so adapting it will take some time. We are doing things, for example our seasoning; we used to import, but now, we just import certain aspect of it and we source most of it locally and we blend and manufacture. We have just started doing that in the last few months. That is an example of how we are improving our made in Nigeria goods.
Of course the big question is dairy. We have seen that there is a few dairy farms in Zimbabwe, Ilorin in Kwara State, Jos and Obudu. But we are talking of a few hundred heads of cattle.
Really what Nigeria has to focus on are those crops that are indigenous to us here. There must be a reason God put palm oil, cocoa, cashew, groundnut, sorghum, soya, cassava in Nigeria because they are suitable to the Nigeria climate and what we have to do here is to resurrect those crops instead of bringing in foreign cows and cattle, and invest in something that is not naturally produced. We should be developing rubber, palm oil and processing them here. Rather than exporting cocoa we should be processing it here. One of the success stories is cement and now Nigeria is producing and exporting cement that is what we should be doing with our indigenous agricultural products. We should be processing cocoa, palm oil, groundnut and cashew and developing agriculture that way.
Promasidor will continue to do its own, in substituting import with local raw materials wherever it can. We are already working with local businesses, and buy a lot of our nutrients from bio organics, a Nigeria company producing vitamins and nutrients locally rather than importing them. So we are doing what we can and I think it is a major structural issue and government needs to focus on those crops that we can easily develop.
Proliferation of imported goods
There is no doubt that there are different standards. By and large, companies in Nigeria are heavily regulated. NAFDAC is doing a very good job, SON is doing a very good job. Infact we just had our ISO certification and I am very positive and optimistic that we will get our accreditation. Now a lot of products that come in from overseas particularly those from China and India are not properly accredited.
You know, they just bring in a container and one wonders how they get through the ports and how they get distributed when local producers go through so much inspection. If you take seasoning for example, there are so many powders that come from China that are available in the market. They claimed they have been inspected, but they do not have NAFDAC registration, and somehow they are allowed to come into the market to sell at very cheap price.
That has a cost not just to Promasidor, but some of our competitors who are world class international companies, that ensure they produce here meeting all the high standards and then somehow they are made to compete with cheap imported products. One has to say that some of the businesses that are coming into the market, one wonders if they are subject to the same type of regulation and inspection or whether there are some short cuts that they take. These things are bad for the consumers because Nigerians’ consumers deserve to have good quality and safe products.
I am always complaining about multiple taxes and I think the government does not understand how we feel about it. Multiple taxation is very difficult to explain. You have the federal, state and local governments eyeing the same revenue. Everybody is looking for revenue, you know if I want to put a plant here I need Environmental Impact Assessment Certificate at the state, at the local level and I have to pay this or that levy. If I want to do a promotion, I have to pay some fees and inspection are also randomly done, I have to bring both the national and state lottery commission, SON, Consumer Protection Commission (CPC) and all of these people are charging you fees that must be paid or you face sanctions. All of these give rise to duplication.
We pay company tax, we pay expatriates tax, which are paid to Lagos State Government. In fact, for three out of the last four years, we have won awards from Lagos state presented by Governor Fashola, for other state integrity when it comes to paying taxes. So if I pay my taxes why should I pay another N100,000 to an agency for inspection? Why do I have to pay something like N10 million every year on different local government levies, if one of my vehicles with Cowbell on the side drives from here to the east, every local government would stop them and make them pay levies and if they are missing one sticker they will arrest the driver and arrest my salesman then I have to go and pay money to get them out. These all constitute multiple taxation. Now I have to say MAN is making a very big effort.
The great thing about Chief Kola Jamodu as president of MAN is that he has been a minister. He was a very good minister, you know the cement that we are talking about comes from his days as Minister of Industry. He understands the industry and I understand that the economic management team chaired by the President has announced the complete review of taxes to address the monster called multiple taxation.
Advice for prospective entrepreneurs
Well the first thing I say to young entrepreneurs is remember the African adage that says if you want to eat an elephant eat it one mouthful at a time. If you are a young entrepreneur, make sure you have achievable targets and goals. Understand the customers and consumers to make sure that your business plans are filled with the right kind of data and information. You know people are too busy to produce something and not realising that they can’t sell it at that price.