Joe Hudson is the Chief Executive Officer of Lafarge Cement WAPCO Nigeria Plc. In this interview with MAUREEN AZUH, he talks about the growth and prospects of the industry
What has been your experience working in Nigeria?
I’m very excited about Nigeria. I love
being here. I have been in Africa since 1992. I first came to Nigeria in
2009 and I have been living here for three years now.
It’s a place that has a lot of energy;
there is a huge amount of dynamics going on and I am passionate about
the people. A lot of people say things about Nigeria but the truth is
that it is a place that is going to be on the world map and being part
of that is really exciting for me.
Last year, it was reported that the
cement industry grew by 95.6 per cent within a span of eight years from
2005 to 2012. As a key player in the industry, what will you say is the
implication of this for the industry and the country’s economy?
There is a lot of strong growth because
the population is growing generally. There is also a huge amount of
investment and a huge deficit in terms of infrastructure and housing. I
think the backward integration of the Federal Government has been a key
driver in the growth of the local industry.
Nigeria used to be dominated by imports
but with the backward integration policy of the last 10 years, the
situation has changed and now we have local manufacturing which creates
local jobs and secondary employment for a lot of companies that support
the industry.
For the first time, we have local cement,
unlike the old days when you had imports and scarcity of cement. Now,
we have a more consistent and stable supply. We have new technology and
we have better quality control. Certainly, it is a very different
landscape than it was about 10 years ago and we see that the country
will continue to grow.
A key point in that growth is that per
capita consumption is still very low. When I was living in Egypt about
four years ago, the consumption was about 600kg per capita but here it
is about 100kg. So, there is still a huge amount of potential for growth
in Nigeria.
What we try to do at Lafarge is to
develop more products for different applications. Before, we had nothing
specific for block; but now, we have the rapid setting cement that is
used for block making; we also developed already-mixed concrete solution
which is certified and tested.
In Europe, 50 per cent of the cement goes
into concrete. This is the sort of thing that we are trying to do;
create more products for different applications that will increase the
consumption of cement. If you just have one product, you are limited and
the consumption will still be low.
It was assumed that improved local
production would crash the prices of cement but the reverse has been the
case, why is this so?
It is quite a complicated issue. First of
all, the price of cement has stabilised in the last few years since I
have been here. Where the price of cement used to oscillate was at the
retail end often done by the middlemen and distributors; so, when there
is no cement, prices go high and when it is available, the prices are
low. Over the last three years, however, the prices of cement in all the
regions have become more stable because it is more available locally.
We have also worked very hard on the distribution of cement. So, looking
at the price, it is much more stable now than it had been. The
manufacturers have not increased price in the last three to four years
despite the fact that import costs are very high.
We have a lot of high import costs. For
example, in Nigeria, you have to have a power station to run your cement
manufacturing company and that is a significant investment. The
distribution is very expensive; a lot of the spare parts have to be
imported. But I don’t think there has been a significant increase in
pricing; it has gone down at the retail end; prices have gone lower than
when I came.
Why are some manufacturers closing part of their production as a result of excess production rather than exporting?
It is hard for me to comment about other
companies. I prefer to talk about mine. I think there is quite a healthy
supply and demand balance at the moment; maybe early last year, there
was a bit of excess capacity because new capacity was just coming on,
and we had not reached that sort of equilibrium; but at the moment,
there is a healthy supply and demand balance.
Cement is a big industrial organisation;
so, you have to sometimes shut down for maintenance by taking a plant
down, for instance, and the maintenance could take up to a month. By and
large, there has been a balance and I think in the future, there will
be export which will increase capacity. I think Nigeria will also need
to absorb a lot of that capacity as the market is growing. As I said
earlier, the consumption is still very low.
The Federal Government recently announced plans to begin the use of cement in road construction. What is your view on this?
It is a positive move. In fact, when I
first came here, we got people to start the conversation about concrete
roads. We are very excited about that. If you think about the need and
the deficit of infrastructure in this country, concrete is a great
solution not only for its life cycle but it is cheaper; you don’t have
to replace the road every seven years; they will last for about 50
years. The durability, efficiency and even performance of these roads,
given the soil structure in Nigeria, will lead to a much better
solution. For us in the industry, it will increase the consumption per
capita. If you look at other countries, sometimes, they use 1,000 kilos
per head because they use concrete applications and have concrete roads.
What has been the situation in your company since the privatisation of the power firms?
If you talk wider about power in Nigeria,
I think it is one of the key levers that will bring about growth. I
heard Jim O’Neill talk about the MINT countries and he said that
Nigerians are doing well despite the fact that there is no power supply.
Can you imagine how well we will do if everyone had light in this
country? If we had stable power, people would be able to have lower cost
manufacturing and businesses in general and it would have a huge impact
on the economy.
There are some challenges in that but I
am excited about the recent investment in power generation; though more
work needs to be done on transmission, distribution and regulation of
the investing companies. The privatisation process is a positive one; it
just needs to be accelerated for the big benefits to come in.
The performance of the industrial
goods sector under which you are listed on the Nigerian Stock Exchange
has not been positive since the beginning of the year. But between
September 2013 and February 2014, your share price has gone up from N99
to N105, why is this so?
I think it has to do with our integrity.
We are multinational, international and local. We have been here for 54
years. I think why our stock price has been going up is based on a lot
of things but basically our reputation. The business is performing; the
result quarter by quarter is showing growth and I think in terms of the
equity market, people are attracted to the multinationals that continue
to invest in Nigeria, which is an attractive growth market.
Experts say the private sector has
focused on building for the elite, ignoring the masses that really need
housing more. Considering the fact that Lafarge is also into real
estate, what do you think can be done differently?
This is another key issue. I said earlier
on that we believe in economic and social progress. Cement business is a
long term business and you really need to come to terms with the
problems that the society in which you operate has. We are working on
affordable housing project with a French company and a microfinance
bank. This is not a panacea to fix all the problems in Nigeria but a
pilot scheme that we have done for others to follow.
Recently, a group accused cement manufacturers of producing substandard products. Is there no standard for product verification?
In Nigeria, there are no substandard
cement products. The Standards Organisation of Nigeria has put in place
an international standard for cement product and the industry itself has
modern plants with good technology. The cement standard and product are
very good in Nigeria. The problem of building collapse is not that of
cement; it is a problem of enforcement of proper building standards and
practices. It also boils down to people taking shortcut and not using
the right professional management underground to ensure that the right
quantity, proportion and materials are going in. It is not an issue of
cement. We have different cement for specific applications; it is a
misnomer to say that cement is responsible for building collapse.
The artisans do not also know the uses of
cement sufficiently which I think is part of the problem and we have to
do more on education and awareness.
No comments:
Post a Comment