MAN Introduce Fire side chat with GPCE at the high-level roundtable on industrialization in Africa

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The General Practice Conference & Exhibition is Nigeria’s leading Manufacturers event hosted annually in Lagos by Manufacturers Association of Nigeria (MAN) with this year 2021 at the roundtable on industrialization in Africa to commemorate the 50th anniversary of the Manufacturers Association of Nigeria.

The General Practice Conference & Exhibition (GPCE) delivers innovative solutions and practical strategies to improve manufacturers.

Q1. Drawing from your wealth of experience of operating in about 15 African countries, how do you think the continent can develop globally competitive manufacturing industries?

  • To be globally competitive we must produce either higher quality or at cheaper cost or ideally both
  • This is clearly not easy given that others have been at it for many years. It is a David vs. Goliath situation
  • So, it will be better to start by being locally competitive. That is the approach adopted by the Asian Tigers
  • Initially protection and incentives will be required to support the local firms. As they learn, they can then become more efficient over time until they are able to compete globally
  • Governments must at the same time continue to remove the hurdles to competitiveness (e.g., poor infrastructure, unfriendly regulations, electricity, access to affordably finance, etc.)
  • In our cement business, we started off investing in cutting edge production technology to produce high quality cement right from the start, we then continuously pushed to reduce our costs and continue to do so. Today we are globally competitive and can be even more competitive if government makes the ports cheaper and more efficient
  • Building on the learning from cement, we are building our oil & gas business (refinery and fertiliser) to be globally competitive from the start

Q2. Within the context of the diverse manufacturing and trading regimes, aimed at a variety of economic and political objectives on the continent, what is your advice to the AfCFTA’s managers towards enabling rapid cross border business collaboration and competition?

  • Given the potential benefits of AfCFTA, my advice to all involved would be to speed up implementation as there are quite a number of issues which still need to be addressed
  • It would also be good for them to study the reasons why the previous trading blocs did not enable intra-Africa trade to exceed 15% of total trade and what can be done differently. These problems don’t suddenly disappear under AfCFTA
  • If I have to spend $10 on port charges to export cement while someone on Europe spends $3, then the European company already has a $7 cost advantage relative to an African producer
  • Similarly, if I spend $8 per unit of gas while someone in America spends $3, then they already have a $5 cost advantage
  • By the time you look at a number of these examples you will easily be looking at a $20 cost disadvantage
  • It is therefore vital for governments to continuously focus on removing barriers to competitiveness. That is the real ease of doing business, not how many days it takes to register a company
  • Neighbouring countries should also collaborate on their industrial policies and identify areas where one country has a clear advantage in production of a particular good. They can then agree to focus on different sectors and trade accordingly

 

 

Q3. There is a school of thought which argues that in the face of limited resources and the experience of other nations, Africa should consider identifying and supporting ‘potential winners’ as the basis of an industrial strategy. What is your view of this?

  • You are right. The Chaebol model has been successful in Korea and the Keiretsu model in Japan
  • Some argue that support should rather go to SMEs as opposed to large industrial companies
  • It is important to support SMEs given their job creation potential. But the truth is that an SME cannot establish globally competitive operations. Our oil industry, banking, telecoms, etc. are certainly not run by SMEs
  • So supporting the winners is definitely a good approach as this has been quite successful in places like Asia. However, it is important to ensure that this does not get politicised and that support goes to companies that are already winning in the sectors they play in

Q4. What does it take to get the African entrepreneur to choose manufacturing, despite the challenges and in the face of more rewarding ventures?

  • Manufacturing is difficult especially in Africa. Friends and family sometimes ask me “why do you do this?” some even jokingly say something is wrong with me
  • Clearly, trading has less headache, less risk, and often provides better return on capital. Once you are established in trading you will get credit lines, and this amplifies your returns even if margins are thin
  • For me, what it takes is whether someone is just out to make money or if they want to build something and leave a legacy. If you just want money to fund your lifestyle then stick to trading. But if you want to build something that outlives you and experience tremendous personal growth then you should go into manufacturing

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