‘Government must control influx of substandard aluminium products to save local industry’

Oluyinka Kufile, chairman and managing director, Qualitec Industries Limited, manufacturer of aluminium roofing sheets and coils, recently took ODINAKA ANUDU round his burgeoning factory at Ota, Ogun State. In this interview, he explains why he has been ramping up investments at the plant, challenges confronting him and the aluminium industry in general, as well as what the Federal Government must do to save the sub-sector from collapse. 

Having gone round your factory at Ota, it is clear that a lot of activities are going on. How did you get this far?

What we are doing there is more or less metal-related. This gives us peace of mind. We have come this far because we believe it is not proper to start one thing and then jump into something else. Whatever you are able to do, do it well. At any point in time, we want to be able to stand and say, ‘yes, this is what we are doing’. We want to be able to compete favourably. We have always believed that if you are doing something, you need to be at the forefront. Today, we are in the forefront of production of aluminium in Nigeria and we are very, very proud about it.

How much have you invested so far at the factory?

It is a huge investment and has been on for a very long time. We have spent huge amount of money over a very long time. We started aluminium industry in Ojokoro. That was in the early 80s. We were then producing pots, pans and the rest. Now, what we have sunk there is not less than $100 million and it is there for anybody to see.

I remember when we started, it got to a point that we had to approach American Export-Import Bank for loan, and immediately, the management obliged us and gave us the facility. That was about 13 to 15 years ago. We wanted to invest more but along the line, there was global meltdown between 2007 and 2008, which affected us negatively. Most of the pieces of equipment you saw there were actually imported between 2007 and 2008. But because of the meltdown, we could not go on because the situation impacted negatively on our business, since we also depended on export of raw materials and other things. But now that we have discovered that government is trying to encourage us, we have decided to start re-installation of all the equipment. What it means for us is additional operations, because if you are producing 10 tonnes and discover it is not enough, the most reasonable thing to do is to acquire more equipment, upgrade your facilities to be able to produce more with higher quality and be able to compete in any part of the world. That is why you see huge constructions going on.

What is the capacity of your plant?

It depends on which equipment you are talking about. For instance, the caster line you saw there can give about 15,000 tonnes, if it runs 24/7. We have just installed other pieces of equipment and they are waiting for commissioning. The health situation all over the world has caused a bit of delay, but I believe before Christmas, something will be done in this regard.  For the rolling mill, the capacity is beyond the caster line; that is why we are installing the second line. The second caster line is bigger and will give us more products. So by and large, the rolling mill should be able to produce 20,000 tonnes. When you move from there to the coating line, you will see we have just commissioned a bigger line. This can conveniently give us 20,000 tonnes. But because sometimes there could be pressure, we decided to install a bigger one that can give us wider sheets to expand the scope of our customers. The more we can produce, the more customers we can service.

And when you move from there, you go to the other line that can produce 3,600 square metres in a day. If you run two shifts, this will multiply. So we believe there is hope.

Who are your customers?

So many people in the industry. Most of the people in the industry are our customers.

What do they buy from you?

They buy what we produce. They buy and use them in their production lines. We are simply giving them raw materials. The raw materials are the coils – plain coils and coated coils.

I am sure you must have some challenges or clogs in the wheel of your operations. What are they?

Yes, we start with government policy. For the past two years the present government has shown willingness to put things right. But somehow, they take one step today, but jettison it somewhere along the line. Government will make policies and some people will go behind and do something that will render it ineffective. We tell government that anything they want to do should be sectoral. If it is sectoral, everybody will be able to survive. But someone will go back to the same government to get a letter for the Customs. It does not work that way. If you do that, you are killing others.

Two, there are so many manipulations at the ports by the Nigeria Customs Service. It is either they do not actually understand government policy or they have a different HS Code or something else. Sometimes things we do not understand happen.  When we are at our sectoral meeting in the Manufacturers Association of Nigeria, there are so many issues that will come up and you ask yourself, can this be true? But after investigations, you discover they are absolutely true. Government will do theirs but some unscrupulous elements will be looking for loopholes in the government policy to short-change them. When this happens, the reasonable thing government should do is to punish such people. What happens today is that government will make laws to protect certain products and say: pay 20 or 35 percent on imports. Some people will go behind, look for loopholes and pay 5 percent. Even sometimes, they do not pay anything. Unless the government puts a stop to that, we cannot get anywhere.

Today, we are talking about quality. But if you cannot produce anything, whoever wants to sell to you can sell rubbish. As a nation, there are many things we need to do that we are not doing. You have seen the power problem. It is not supposed to be my responsibility to run after diesel, gas generators, spend huge amount of money to bring in 32KV line and all sort of things. We disconnected from the national grid since 2005. When you got down there you saw us running 2000 KVA diesel generator. We have been using gas generators too. We ordered for their spare parts, which have to come from America and will take some time to arrive the country. Down there, I believe we spend about N15 million on energy in a month. Is it possible for us to close down? The answer is no. We have some Nigerians working and earning their living there.

So what is the staff strength at the factory?

We had about 300 people. But gradually, it is declining. But now, with huge investments going on there, people have to come in to man all those pieces of equipment. This means if the policies are right, we can start employing again.    

You have talked about government a lot. What exactly do you want the government to do or put in place?

One, protect the sector with appropriate tariff cover. Two, whatever policy the government puts in place in terms of tariff should be judiciously executed by the Customs, because that is where we have a major problem. With most of the things we have there, we cannot even compete; how much more when people bring in something without paying duty. Three, any protective policy should be sectoral. It is not about an individual, but give it to a sector and everybody will grow. Four, where is the long-term loan? The facilities are not there. The enabling environment has to be created. The Standards Organisation of Nigeria (SON) is working hard to ensure that fake products do not enter the country. But it can only succeed if we are producing locally. With local production, officials of SON know the manufacturer, and the factory can be locked up. But when we are bringing in from other countries, it will be difficult for SON to control fake and sub-standard products. Government must do everything within its powers to encourage local industries.

I understand that some time last year, the Basic Metal Group of MAN went as far as asking SON to reduce the thickness of aluminium products. What prompted this action?

Something happened about eight years ago, prompting the government to make a pronouncement that they would not want anybody to produce anything below 0.5mm. We discovered it could be very difficult, taking into account middle-class Nigerians who are in the majority. We sat down with the SON and agreed for 0.40mm. But in an environment like ours, there are unscrupulous elements who are exploiting the populace. They will bring in 0.20mm, 0.25mm or 0.23mm. You discover that the aluminium they want to use for roofing will look like paper; you can easily tear them. Of course, gullible Nigerians fall prey to them. However, if we look at it critically and government says they are accepting 0.3mm, no problem. But the most important thing is to be able to manage and monitor it.

There are some products 0.30 can go with, no doubt. There are some 0.40 can go with, while there are others you can only do with 0.50mm 0r 0.55mm. Today we even have some people who are using 0.9mm for their projects. It depends on what individuals want.

This brings us to the issue of ingots, your raw materials. Why do you import them from other countries? Can you not manufacture them here?

You must have been hearing of Aluminium Smelter Company, Ikot Abasi, Akwa Ibom State. The plant was meant to produce 190,000 tonnes of ingots in a year, but the very few years the company was in operation, it never produced more than 35,000 tonnes. It has been from one court to another. At a point the last operator was Rusal. This company was operating but was still being affected by the Nigerian factor, which was also affecting us. But suddenly, another buyer came up and they ended up locking the place. If Cameroon can run their own, and Ghana is running theirs and generating huge foreign exchange from these products, why can’t we run ours? The huge quantities of ingots you saw at the factory were from Cameroon because Nigeria could not run its own smelter company. The only way out is for the government to resolve the crisis and move on.

But you earlier said you produced some of the ingots I saw at the factory.

We produce ingots but it is different from the level of ingots we are talking about. We have much capacity in waste recovery. If we want to be greedy, we can export wastes. But we do not do this because we believe in industrialising Nigeria. We generate wastes, recycle them and use them for further production.

Are you encouraged by the government’s reduction of 5 percent duty on ingots?

Well, the duty is ok but still not enough. A lot more still needs to be done, as I said earlier.

Your name ‘Qualitec’ seems to have been derived from the word ‘quality’. How connected are the two?

Yes, everybody knows us by quality because we stand by it. Our name is Quality Technology, but it was shortened to Qualitec.

How do your products compare with their Chinese or Asian peers?

You see, aluminium production is the same everywhere. But we are not likely to grow as long as there is an opportunity to bring products from China at very cheap prices, duties and rates. We were not importing aluminium products from China before but today, they have taken over everywhere.

Have you got any assistance from Ogun State government? Since you have your investment in the state, employ citizens of the state, pay taxes to the state and contribute to the state’s economy, are you not supposed to command some ‘bragging rights’?

Well, there are so many factories in Ogun. I doubt if the state government has the capacity to support every one of them. There are more than 2,000 companies in Ogun and it will require a big grace to have an opportunity for government attention. You have seen all we have been trying to do there. But it has been from one crisis to another. When you look at the global economy now, you will only pray it does not happen again. If it does, it can be difficult for most manufacturing companies in Nigeria because they import raw materials. For everything we are doing, we are doing it in anticipation that the Federal Government will fulfil its promise of supporting the sector. That is the only reason we went again to borrow to start installing all those equipment and embark on those constructions. So we are waiting for government’s support.