‘Abandoned projects won’t come up if construction jobs are given to the right people’
A recent media report estimates that 11,886 projects valued at N7.7 trillion were abandoned all over Nigeria in 2013, linking it to the culture of impunity that defines the attitude and character of the elite in society. In this interview, IGBUAN OKAISABOR, Executive Vice Chairman/CEO, Construction Kaiser Limited, takes a look at the construction industry, saying that, among other factors, project abandonment contributes significantly to this industry’s slow growth. He however, sees hope in the industry and the economy. He speaks with CHUKA UROKO. Excerpts
Construction industry and abandoned projects
I believe that the issue of abandoned project would be reduced or would not come up at all if projects are given to the right people. This issue is however, reducing, especially in the private sector because the procurement system is a lot better now and government is also improving on its part.
The good news now is that modern companies like ours are beginning to understand that an advanced payment is not our money, but one we are supposed to use to work. The industry has evolved to a point where clients ask you to go and bring a bond from the bank which qualifies you for an advanced payment. The bank in turn asks you to bring a property as collateral. So, if you take the money and divert it, the bank takes your property to pay back the loan.
Slow growth in construction industry
Construction is a high asset business. You need to manage for a long time before getting your reward. You need to invest in your business and that is what a lot of Nigerian entrepreneurs don’t do. They need to put a lot of discipline in the management of resources. When a client makes an advanced payment of N1 million, you don’t have to take N500,000 out of it and buy a car. In the past, Nigerian entrepreneurs did not show discipline.
Secondly, scarcity of well trained people contributes to slow growth. Our educational system is no longer worth anything such that when you employ people, your company has to retrain them; we have identified that area as one that we have to invest in and we are doing just that. We are investing in training and also in equipment.
The multi-national companies come in from Europe and US. They can borrow money from their home countries at single-digit interest rate. If Julius Berger, for instance, wants to buy equipment, they simply go to their country to buy. Sometimes they are even begged to buy this equipment. For us, if we want to buy equipment, we go to local banks and borrow money at 21 percent for two years while we are competing with companies that get money for 10 years at 3-4 percent interest rate.
What is to be done?
As Nigerians, we need to invest in our business; we need to get more committed; we need to show more financial discipline. On the other side, we need support from government in terms of tax rebate. Anywhere in the world, construction and manufacturing are the highest employers of labour. Once the construction industry experiences unemployment, you know that the economy is going into a recession. We need to be supported so that we will continue to employ more people to stem armed robbery, terrorism, pipeline vandalism etc which are direct consequences of unemployment.
The foreign companies have advantages over us, but there is something we have which they don’t have and that is local knowledge. We need to improve our management and show corporate governance. CEOs don’t need to go about with cheque books in their bags. There should be processes, policies and procedures.
Forming partnerships to grow local capacity
I can’t agree with you more. I wonder why people are so obsessed with forming their own mushroom business and with such businesses, we cannot form a good team to fight the bigger companies . In Construction Kaiser, people are allowed to form their own businesses inside this business and that is why a regional manager here is bigger than some MDs in other businesses because such a manager is allowed to run his own businesses alongside.
Those with entrepreneurial skills are allowed to express themselves; what is important is that they are told what they should not do and to keep to the overall strategy of this company.
This is time we should really come together as it happened in the banking industry where two, three or five banks came together to form a formidable bank and today they are gaining from it. People should allow their companies to have their own life and not to think of whether it is their son or daughter that succeeds them. For me, if my children decide to work here, they have to apply like anyone else and if they work hard to get to the top, so being it, but the company must have its own identity and life.