Not all cement raw materials are locally sourced – Umar
Rabiu Umar is the Managing Director of Ashaka Cement Plc, a subsidiary of LafargeHolcim. In this interview with journalists, he says multiple taxation remains the bane of business growth in the country. MAUREEN IHUA-MADUENYI was there
How did the Boko Haram hostilities in the North-East affect your operations?
On November 4, 2014, our plant was attacked by the insurgents. Obviously, they were trying to find explosives. Exactly one month after that, there was another attack. Of course, the default thinking was for the company to shut down during that period until things calmed down.
The management of Lafarge, however, took a decision to keep it open because as you may know, stopping and starting an operation this big is not really a day’s job because we have about 700 people working here and we live in a place that is more or less like an island.
Even if we had shut down operations, the members of staff would still be there. You can’t have 700 people suddenly pack their bags to go somewhere. Therefore, a decision was reached at a significant financial expense to keep the plant running and I think it was the right decision which has shown that we have the resilience when it comes to keeping our operations running.
Looking at the post-insurgent era, how are you contributing to the redevelopment of the area?
To start with, we make cement and most of the destructions in the area were civil in nature, if you take out the psychological and socioeconomic aspects. So, naturally, we are contributing in that regard. If you remember, there were more than two million people who were displaced by the insurgency and by virtue of keeping this operation open; we are helping to make sure there is enough economic activity in the area.
Like I said, there are 700 people working here directly and probably another 2,000 people who do supply and other things. The average household in this part is 10. So, you can imagine what the company has done. A more direct approach is helping the communities acquire skills that can be useful in terms of social services and health care as well as education.
We have an artisanship, for example, that has intakes from the communities strictly created for them. Graduates of this scheme go on to set up their businesses and develop their communities. If you are a carpenter or a mason, you get the tools of the trade and can go into the community to start.
At the same time, we absorb some of them. The second most senior person on the industrial side after the plant manager is a local person from Bajoga, who came through the programme. We took him to South Africa and our sister plant in Calabar as the second most senior person there as well.
We look at the contribution from the perspective of our operations rather than direct interventions, and, of course, we have those. We have built classrooms, boreholes and a lot of things but we call those ‘business as usual’ because they are basic things that we do. Building classrooms doesn’t mean that education will happen. So we do more sustainable activities in that regard.
Giving back to the community comes in different forms and sizes. The focus we have as a company worldwide is health care, youth empowerment and education. These are things that everywhere you go in the LafargeHolcim world, you find that different societies have different ways of implementation but these are the three core things.
When it comes to health care, for instance; I can say directly, today on a daily basis, we have a clinic that sees over 200 people from the community. Both consultation and drugs are free; it is one of the things we believe is important.
I just spoke about youth empowerment. We have in excess of 2,000 graduates since the beginning of the programme and every year, we keep taking them and we pay them for the two years that they are here.
Over 90 per cent of our staff are of northern stock; 70 per cent are from the north east while those from Gombe make up 56 per cent of our staff. And of course, most of them are from communities around us.
And when you look at education, we have two schools right inside Ashaka and they have over 1,000 students and 60 per cent of them are from the community and they don’t pay school fees. I think also beyond how much money we give the youths, there are also other exchange programmes that we have.
A polytechnic is about to start at Bajoga. The reason for citing the school there is because Ashaka exists here. Polytechnics produce hands-on people. The plan is that we will partner with the school to do a lot of exchange programmes.
We are also starting an agricultural programme called agri-ecology; it is all about mixed breeding. You take the ecology of agric process back to its natural way where one crop fights the pest of the other, for instance. This creates a high yield.
So, in a sense, we are going to roll that out to empower our communities and help increase their yield by up to 30 or 40 per cent. It means they can generate more revenues from one piece of land.
Cement manufacturing comes with a lot of emissions. How do you control your operations so that it doesn’t impact negatively on the environment where people live in?
Cement business involves extracting things from the ground but at the same time we have a standard. The LafargeHolcim, as the largest building materials business in the world, has standards.
The standard is such that if any country that the company is operating in has low standards, our standard becomes what we use. But if it is higher, then we also use it. So, at any point in time, we make sure we are well within the standard that each location has.
We have a very high standard and there are different regulatory agencies that we work with. They include the Ministry of the Environment, the National Environmental Standards and Regulations Enforcement Agency.
The key concerns are the dust emissions and when it comes to coal, there is the acidity. And of course, before you even get a licence to operate, there must be an environmental management plan in place. Beyond that, we make sure we have an improvement plan.
A few years ago, you know you are approaching Ashaka when you find dust on vehicles but today, that is not the case. It has reduced and we have the numbers to show for it. We hosted the former Minister of Environment some time ago to see what we are doing. Of course, there is always room for improvement but the most important thing is to ensure that the dust emission is lower than the limits set by the environmental plan.
Sometime ago, you signed a development agreement with some communities. What is the status of the implementation of that agreement?
The implementation is on going. We ran into some misunderstanding. It was actually a law, everywhere you operate a mining activity you must have a community development agreement which defines the basics of what you must do but you don’t limit yourself to only what is on the agreement.
We ran into some issues but it is being implemented while we are trying to do more; not everything we do is in black and white. The medical thing I talked about earlier is not part of the plan but we do it.
It is a five-year programme but what we try to do is to make sure that whatever we want to do within a year is done before the year runs out so that the community can start getting the benefit.
How are government policies impacting on your business?
I think there are two levels to it. Government policies in a sense have helped us to operate because without a framework, you cannot run. Is there room for improvement? Of course, there is.
One of the key things that is really confusing is multiple taxation because you have the federal, state and local governments. And sometimes, when you stack up everything, it is a bit confusing to understand at what level it stops. It is one of the key drivers of business that every business owner talks about in the country.
It also brings about uncertainty; you plan something you want to do this year and suddenly, something comes up that is not in your plan but can have an impact on your planning and result.
A lot of people think that the price of cement is very high considering that Nigeria has limestone. What’s your take on this?
I wouldn’t want to go into that. It is very controversial because there is an emotional part of it and the real part of it. And typically, we tend to be more emotional. I don’t want to go into details but it is not quite true that all our raw materials are locally sourced. You can find out how much cement is in Chad and Niger in dollar and make the comparison.
Lafarge has some programmes on affordable housing in the southern part of the country. What similar initiatives do you have in the north?
It is a national programme, not specific to any region. We are in the process of developing one in this region. Affordable housing comes in different shapes and forms. For instance, you may want to build houses in large scale. So, there is affordable housing and there is mass housing.
Mass housing may not be the bottom of the pyramid but it allows more people to really have access to housing. And how does it work? You’re building this same structure in a thousand places and instead of using blocks you can use what we call the formwork, which is one of the things we are working on.
We have done one in Ogun State and we are taking people from the north to see how it works because the idea is to copy the model and ensure we can do it quickly and in a cost-efficient way.
There has been a lull in the property market. What effect has this had on cement sales?
First of all, Nigeria went into recession and anybody who lives in Nigeria knows the impact. The cost of anything that has any correlation with foreign exchange has doubled. So, first of all, that is a reality.
The income left after taking care of basic needs has gone down, and naturally, there is no way it won’t have an impact on certain sectors that are not immediate, like food. And then of course, the economic situation means that the market is not growing as fast as expected and I think that’s publicly available information.
People tend to blame affordability of housing on cement. To what extent will you say cement influences affordability?
Cement is less than 20 per cent of the total cost of building construction. What is the correlation between cement and the cost of building? The global average is six per cent. This is verifiable and a scientific information. It depends on the building practices; for instance, not everyone use hollow blocks; some use the formwork. That way, there is a lot of saving.
So, there are a lot of building practices that help to bring down price but when you look at the price of blocks and cement, the global average is six per cent. In Nigeria, it may be seven per cent but I don’t think it is up to eight per cent.
Typically, people think if the price of cement is half of what it is today, it increases affordability or the number of people that can afford to build their own homes. In a sense, you can say yes, but it is only six per cent.
The rest of the 94 per cent is in the finishing. You can build and finish the carcass of your building and you are just 30 per cent of the way including the concrete, beam and all. You find out that the cost of one door will probably build the walls. That is where most of the cost goes.
What are your expansion plans for Ashaka Cement?
Where we see Ashaka is as a more efficient business in the next five years and one of which is from the cost perspective. There is currently a project on going; we are building a power plant to be able to generate our own electricity. Today, we are relying on generators as you know the cost of fuel whether LPG or diesel is very high and has a high correlation to foreign exchange.
We are building an N11bn project, a 16-megawatt coal-fired power plant to cater to our needs. That is one of the biggest plan that we have in terms of being able to reduce our costs because one of the biggest costs in cement production is the cost of energy.
Inside the kiln, we have temperature running up to 1,400 degrees, which is up to the heat used for steel. You can imagine the kind of heat we are talking about here and to generate that kind of heat, we need fuel.
We are 1, 500km away from the coast of Nigeria and when there is a challenge of fuel, people can import but we are here in a landlocked place. So we must have a different source of energy. Again, there are gas pipelines but Gombe, Benue and Sokoto states do not have. Everyone else is linked. Gas is much cheaper but we don’t have a link to the pipeline. That’s why we need to find a solution.
The second is to unlock some of the existing potential in terms of capacity. Over the years, you lose some efficiency and we are trying to gain back that efficiency.
The other is, depending on how things go, we intend to increase the capacity of the plant by building new capacity.