Mr. Ekarika Itak Ekarika is the Managing Director of Akwa Ibom State-based Quacem Limited, a cement producing company. In this interview with journalists, he spoke on the need for government to support cement producers, among several issues. CHUKWUDI AKASIKE was thereSome cement manufacturers sometimes defraud unsuspecting customers when bagging their products; they refill far below 50kg for a bag of cement. Is Quacem not involved in such act' No cement producer whether bagging plants or manufacturing companies will want to be involved in those practices because the companies are big. For instance in Quacem Cement, the Board of Directors is made up of credible people. The issue is that some of the big distributors that some of these companies use sometimes buy in bulk and we cannot control them. But we monitor them.Sometimes, some distributors sell to fraudulent retailers and the retailers will now download the cement. They will buy stolen bags or fake bags in the market and then bag it anyhow they prefer. None of the manufacturers would want to go into such sharp practices.So what punishment do you give to any of your distributors or retailers found in such fraudulent act' When we discover that any distributor is allowing himself to be used, Quacem will cut off such a distributor because it is spoiling the name of the company and the market for the consumers.Is Quacem a 100 per cent government establishment' Quacem is just 10 per cent government. But the support of government both federal and state is inevitable. The Federal Governments support comes in form of giving licences annually for the importation of cement. Also, they try to bring down the cost of inputs. That is making sure that the main machinery are subjected to low duties. But it is five per cent currently.What we want the Federal Government to do is that duties on cement machinery together with petroleum refining machinery that are critical to the industries should be zero. This is because these are industries with huge investment. So, if someone is bringing in billions of naira to invest in such industries, government should allow the installation of machinery to be done and after, such person can now be taxed when he starts making profit.There should also be tax holiday of about three or four years because starting these industries takes time. So, if you have a tax holiday and zero duty on importation, it will, of course, assist most of these industries. That should be governments contribution to the cement industry.Then, the state governments duty is to make sure that wherever a cement industry is located, it should build roads, water plants and so on so that the manufacturer will not have to engage in the construction of those things. You now divert your resources to other areas like the generation of electricity. The fact that power is not available is a major issue.Sometimes, manufacturers spend a lot of money in generating electricity. The manufacturing arm of Quacem cement is using 12 megawatt of electricity. At our new plant in Akamkpa, Cross River State, we will be using 12 megawatt of electricity. Even in Calabar, I am not sure they have up to 12 megawatt. The power and duty rate issues are very important.The Federal Government should address these two issues. For example, the interest rate issue is something The Federal Government can do immediately.There should be zero customs duty for heavy machines. If that is done, it will bring down the prices of cement. But right now, it is impossible to bring down the price when the country does not manufacture enough of it. Duties used to be 10 per cent; it was increased to 20 per cent. All the people manufacturing and bagging now are the people who have backward integration project. Therefore, the duties should remain at 10 per cent or it should be reduced to five per cent.How much is the price of a bag of Quacems Cement in the open market' Right now, Quacem is selling cement at one of the lowest prices in this area. We are selling to our major distributors between N25,000 and N26,000 per tonne; about 20 bags make up one tonne. That amounts to between N750,000 and N780,000 per trailer of 600 bags.Actually, we dont directly determine the price. A bag of Quacem cement is selling now at about N1,700. But if you look at N750,000 per trailer, that means a bag of Quacem cement ought to go for about a N1,250. So the make-up is between the distributors and the retailers and not the people producing.Quacem is a new company. How do you think your product can compete favourably with others that have been in the market for a long time' I agree with you that Quacem is new and I agree with you that the issue of being able to compete is important. But right now, we have a shortfall in cement supply nationally. We dont produce enough cement. That accounts for the price differential between the cost of cement abroad and the cost of cement in Nigeria. Cement abroad (FOB Cement) sometimes is as low as 70 dollars per tonne. When you calculate that, you will discover that cement should be like N400 per bag in Nigeria. The cost of shipping increases the price of cement in Nigeria because we are not able to meet the demand with our domestic production. The ability to meet the demand would take between five and 10 years because of the slow gestation period of this industry but I think we will achieve it.Do you think Nigeria has what it takes to produce cement internally without relying on importation' The issue in cement production is this. For example, in Quacem when we came into the field, we acquired a quarry and got mining licence. Cement is not an industry you can enter with N100m; you cannot even enter it with N1bn even if it is the bagging phase. A set of three shipments of cement we brought in at a time cost aboutN1.8bn. Cement industry is not a small business.So, how many people or banks can come in at that level' It is the duties of the Federal Government to identify the people that have already come into the industry and ask them the problems they are facing. For instance, there should be zero duty on importation of cement and zero duty on importation of machinery used in the production of cement. If the federal government cannot give power now, they should give zero duty rates. If they give zero duty rates, the multiplier effect is important because the manufacturer will now be using the gain from zero duty and put it into electricity and other infrastructure. The fact is that the raw materials are here in the country. But the federal and state governments must give some sort of support because there is no country that has industrialised without serious support from the government.From what you have said, will your product go beyond Akwa Ibom State' Definitely, since the plant itself is in Cross River State, the limestone quarry we have is in Cross River. What we intend to do is to have clinical operation in Akwa Ibom, Cross River and Port Harcourt because the same vessel that brings the goods to Ikot Abasi can take it to Port Harcourt. If we are producing in Port Harcourt, we will sell at a better price than those that are bringing in for bagging.What have been your challenges so far' Our main challenge is getting roads and power into the plant. Those two things, we may have to do it by ourselves. We may have to discuss with the Cross River State Government in terms of partnership so that we offset the cost of those two items. But we cannot wait and say until the Cross River State Government builds a road to our quarry. We have to do it by ourselves. At the national level, we have been pressing the federal government to assist cement manufacturers. At the state level, we want to make sure we press Akwa Ibom State Government to assist the only indigenous manufacturing group that they have. The challenge is mainly going outside cement to cater for power and infrastructure such as roads.In the next 15 years, what should we expect from Quacem Cement in terms of growth' In the next five years, we would have achieved our objectives of producing up to 2.4million tonnes a year and then we would be steady at that because by that time, the Nigerian cement market will get to a mature level where the demand and supply gap would not be too much and then all the manufacturers of the products will now be competing on quality.In the area of employment, is Quacem adhering to the Local Content policy of the federal government' We are adhering to the local content policy of the federal government in terms of employment. Our technical partners are Chinese. So what we have done is that they bring in only staff which we cannot get in Nigeria. Right now, 80 per cent of our staff are local but the Chinese people are the experts in the technical areas. So they have upper hand in the technical field. The technical area is manned by the Chinese people.You talked about backward integration, how is your company handling that' The backward integration basically is the Akamkpa plant in Cross River. We took mining licence since 2008. The government has said that everybody must integrate backward. For us in Quacem, we have started the backward integration even before the federal government started emphasising it. I agree with the federal government because if we dont embark on backward integration, we will still be importing the product we have in this country. Our partners Hebei Henghu Cement Company, China and Investa Holdings Limited, have been in business for the past 50 years. Right now they are producing about 3.5million tonnes in China and they know what they are doing. By December next year, our manufacturing plant in Akamkpa will be up and doing. In a nutshell, backward integration is only possible with governments support. Luckily, the federal government has been supportive, but the support is not enough. That is why we still have the gap between demand and supply. In order to narrow the gap, the government needs to be more aggressive in its support to the cement industry.Tell us the story of Quacem' Quacem story is that of a humble beginning. It was a conglomeration of a few private individuals with foresight and the state governments parastatal called Akwa Ibom Property and Investment Company.The group got together and decided to set up a bagging plant in Ikot Abasi. Luckily for us, because of the devotion and concentration of the partners and the support of the government, the bagging plant took off two years ago and we have been able to bring down the price of cement in this locality. Immediately the bagging plant started, we have got new distributors and the economic activities in Uta-Ewa, Ikot Abasi; the location of the plant, have stepped up. We have direct employment for the people of the community. We have people selling diesel to trailers. In fact, the Nigerian National Petroleum Corporation has opened a floating jetty to help those who bring in the cement where the ship is anchored.Talking about cement prices, how far has your company been able to adhere to the directive from President Goodluck Jonathan that prices of cement should be brought down to at least N1,000' The President has a good plan for the country. The cement producers also have a good plan, but good intentions cannot on their own make such an objective to be realized. These good intentions have to be followed up by concrete steps. The Federal Government has tried by issuing licences from time to time. They also give support to some of the cement industries. For instance, here in Akwa Ibom, the state government is trying. In fact, the roads to the factory cost the state government about N1.8bn.As the state government constructs the roads to the factory, it helps other factories around the area. Apart from building roads, the state government also makes sure there is constant electricity in that community. That is because they know Quacem was starting up there. Really, it was a good support from the government.The Federal Government on its own is trying but the key issues that are outstanding are two. Loans to heavy industries have to be at a very low interest rate because these industries take years before they come up and heavy investments are being injected into the business for a period of several years.Most industrial loans in developed countries are in the region of below five per cent interest rate. For example, in countries like China, Japan and South Korea, when they started, some of the interest rates to industries were one per cent. This is the only way the business can thrive. No matter how rich an industrialist is, he still needs loan to survive. So if the interest rate is too high, there is no way such an industrialist will be able to survive. This is why several cement companies are having issues and the federal government has tried in forming what it called the Asset Management Corporation of Nigeria (AMCON), which has taken several cement bagging companies and cement industries into its umbrella to try to see how they can push it.
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