Mr. Robert Kretschmer is the Managing Director and Chief Executive Officer of Kabelmetal Nigeria Plc., a foremost cable manufacturer in the country since 1966. In this interview with BERTRAM NWANNEKANMA, he urges government to increase duty on imported cable products so as to discourage influx of inferior foreign products.
In what ways can cable industry contribute to the diversification of Nigerian economy?
I think it is high time to look into diversification of the economy. Every problem has a good side. The problem of the fall in oil price is having a good effect, as government is now looking into developing the country in all areas. In the end, the people will benefit much more from the development. As cable makers, it is not so much of news to us because we are part of the oil and gas business. It is part of our business to provide local content for the industry. As you know, everybody uses cable.
But the market is changing all the time. During oil boom, we had a bigger share of our turnover from oil and gas business. Now, this is almost completely abandoned, except in some areas of services. Of course, some construction work is still ongoing, just like some other projects. At the cable industry, we are ready to fill the gap wherever possible. We are not able to produce more because our capacities are not fully utilised. There is too much influx from abroad, which has taken over Nigerian market and that is a challenge not only to us, but also to other manufacturers of cables. But discerning people understand this and consumers are better advised to patronise locally produced items.
What are the challenges of doing business in Nigeria?
Recently, the most overbearing of them is forex. We cannot buy our raw materials in the country because they are not there. So, we have to import them. The major price driver of cable products is the raw material, as this makes for 80-90 percent of the cost of our production, the rest are labour and energy. The forex problem has pushed up the cost and you have to increase the market price, but the market is not ready to pay more. So, it constitutes a big stress to manufacturers.
Another issue we have been battling for many years is power supply. We need a lot of power to produce cable, but supply is still low. So, we depend largely on generators with its attendant cost of fuel, maintenance and all that. Of course, this is a very essential aspect, as energy takes a huge chunk of manufacturing cost. Then there is no infrastructure in the country. To transport anything within the country is very expensive. Then, the logistics are not there to bring our raw materials into the country. It takes a long time because of congestion at the ports.
Why has the cable industry not embraced local content policy to cut down cost?
I would say that we are already doing local content in cable manufacturing. If you buy a local cable, you will see that it is made in Nigeria. It only takes getting the raw materials for a full process to make the cable fully locally processed. What we would wish to have is something like local content policy, which exists in the oil and gas industry. The raw materials have to be available at competitive prices and desired quality in the country. That is what local content is doing in oil and gas industry. I hope they do the same for all the industries, as it will reduce the time wasted in getting forex. This is not what we can influence. It is too complex and needs a huge investment.
Influx of imported cables has remained a problem. In what ways can this be curtailed?
We have been working on that for a long time with Standard Organisation of Nigeria (SON) and Cable Manufactures Association of Nigeria (CAMAN) because it is a common problem. Of course, we have common challenges. Everybody, who is having a good brand name in the country, has the same issues of fake products. We try basically to collaborate with SON or the Customs to limit the influx, but the problem is bigger. I would say we are small industry fighting against a big problem. Fake products are not peculiar to the cable industry. It is a phenomenon to be found in all industries and the relevant authority is trying to tackle the problem. In the first place, if your import documentation is correct, you can bring in the products. It is not forbidden to bring in cable, so there is no way you can compete with the price of fake products.
Do you have any advice for government on how to encourage business growth in the country?
We have to sort out some imbalances in the whole import duty regime. For example, you pay certain duties for all the raw materials you bring in. If someone imports ready-made cables, you pay some duties, but the difference is not too good. Duties on raw materials are usually five to 10 percent, but it is 20 per cent for imported cables. The 10 per cent difference is not enough for us to be competitive. So, there is need to increase duties on imported cables to protect local manufacturers.
The forex issue is one that everybody is familiar with. If you cannot get the hard currency, you cannot work. It affects companies because you need time to place your order, you must produce continuously and if things are delayed because you cannot source your forex, your whole supply chain will collapse. Then there is no raw material, and you cannot employ workers. These are the issues. It is a big problem, as it has a big effect on our operations.
What comparative advantages do Kabelmetal have over other cable manufacturing companies?
A foreign company founded us, which for decades has been in cable business. So from the beginning, there is a lot of knowledge transfer brought to the business. We already have the know-how, which is our benefit from inception. We keep abreast of latest developments in the industry— what is the latest development in compound processing? All this is done just to adapt and remain up to date.
This constitutes part of our strength and the reason they call us the innovative and quality leader in the industry.
Going by the evolution of Kabelmetal in Nigeria, can one say the company has been a success?
It is a success. To be in the country for over 50 years with uninterrupted operation is an achievement. We never compromise our standard and we know that our quality is always the benchmark for the market.
What is the prospect of cable manufacturing business in Nigeria?
The prospect is very good and it will be stupid for any company, which is here already to phase out because the market is huge in Nigeria. We only need to capture the market, which is taken by people who import from abroad.
Source: Guardian Business News