Coleman Cables is a leading cable manufacturing company in Nigeria. TAIWO OMILANI in this interview with the managing director of Coleman Cables, Mr. George Onafowokan, examines the manufacturing sector, the challenges and what his company is doing on local content sourcing.
The federal government has been harping on backward integration, how has that helped companies like yours in local content sourcing?
Today, our percentage of local content, after recession, has improved greatly. We have gone from 80 to 85 per cent local content in our product due to the backward integration in the last three years. Copper is now available locally which accounts for 80 per cent of our product and it is still growing and about three additional manufacturers are coming up this year that is making us locally sufficient for copper.
Aluminum is also coming up, it will be produced locally this year and that will improve local content to about 95 per cent. That has greatly changed the dynamics of cable production in Nigeria, which I would say started about more than 55 years ago. For us today, we are proud to say local content is more than 80 per cent in our product.
How are manufacturers thriving amidst the tough operating environment?
The infrastructural problem of Nigeria has never ceased to be a bane to the industry or sector in Nigeria. Nevertheless, I think in the last two years, it has been worsened by devaluation and policy inconsistency, but things are gradually turning around which is good. But for us, what drives the business is the passion for what we do as manufacturers of cable and we have been in this business for the past 22 years and I have been in the business for 16 years.
We have grown from a small company to be the biggest player, not only in Nigeria, but in West Africa. When you leave this country and see what industrialization is all about in other countries, it gives you a sense of pride actually by bringing those technology into your country and you apply them here and you see Nigerians get trained in it; because we are a company that believes more in local content in terms of raw materials and in terms of the people. If we do not train our people, we cannot really say we have local content.
In Coleman today, we normally invite expatriates to train our people, but we put them on a short period, they must train our people. So, we depend almost 99 per cent on locals for our production. We are a highly technology-based industry and that gives us the greatest pride that we are not only local content in terms of raw materials, but we are proud that we are one of the Nigerian companies that believe in our people.
It was hard for manufacturers to get foreign exchange during recession, how did you cope?
We did not cope with it well; I must be sincere with you. During the recession, we lost a lot and we were down in capacity of about 95 per cent and producing five per cent. We were down in staff strength by almost 40 to 50 per cent at a point. So, it did not go down well with us in terms of exchange rate, but the good thing today is that there is a bit of stability in the exchange rate, but the best part is that we moved from 95 per cent dependence on importation to 85 per cent local dependence.
We are only having an exposure of less than 20 per cent of our business to foreign exchange which is far better when your business totally depends on import and that has changed the dynamics of how we think also locally. As much as exchange rate is high today, we are not too perturbed by that because it is only a minor part of our business that is still imported. I think in the next one year, we expect that to drop to five per cent. The recession in its way was positive because it forced backward integration in our industry, although it is expensive in the beginning, it has become more reasonable to buy today.
At what cost did you generate power since that is one of the problems militating against manufacturers?
The cost of power is so high. Power today is one of the major reasons industries have not grown the way they should because we depend on power for cable factory. We are one of the countries in the world that run drawing machine on generator, this machine is heavy on power. One single machine can use 500KV to run not to talk of the rest factories. In those places, this type of machine runs on power. This makes it heavy on investment.
Our business is so heavy on power. If you look at it today, in Coleman, in terms of diesel power, we are generating in excess about 10 megawatts and eight megawatts in gas. That is two separate investments in power plant. Power accounts for almost 30-40 per cent overhead cost in your capital expenditure.
How are you coping with substandard products?
Coping with brand imitation, faking, adulteration, has become the bane of the industry not only for Coleman. Basically what we try to do is push for availability of our high quality products as best as we can to make sure that our products are seen and available to fight adulteration. This means your capacity must be capable of feeding the actual market. If the products are scarce, the adulterated ones come in to fill the gap. Secondly, we are always carrying out market surveys to know what is happening out there.
Do we say the importance of your product contribute to your sustainability?
Of course, people cannot do without cable because electricity is a vital part of development in any country. The main sustainability is our own structure, which has been survival based on long term views rather than short term gain. In businesses, what I have seen over the years is that as Nigerians, we do not invest in ourselves, but we spend too much time looking at our profitability and how we will enjoy the money rather than long term view of reinvesting.
I will say for Coleman, in the last 15 years, we have reinvested almost 95 per cent of our earnings back into the business. It is very few companies that can tell you they have done that consistently for 15 years. You rarely find those that have done it for two years and that is why we grew so fast because we kept reinvesting majority of our earnings. To me, it’s a long term view. Where do you see the company 10 years ago and where do you see the company 10 years from now rather than where we see ourselves in two years.
Nigeria has always faced crisis and this is not our first recession, but the key is how you survive crisis. Your business strategy must be right, especially in the industry and it must be long-term based because what happens when policy goes wrong and you have not equipped yourself to handle the fall out? Most businesses close down during this period. This happens almost every five years; it is calamity in one way or the other. The key thing is what you did in between the five years to prepare yourself for the next calamity I hope we don’t drive ourselves into calamity, but we must put our business first, take a long term view of our business and strategically that will keep us from issues when they happen.
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