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Ashaka Cement is the oldest and largest industry in the North Eastern part of Nigeria. Typical of its fond name as The Star of the North, the company means so much to its host communities. Despite the impact of its operations on the environment which is quite minimal, the company is a source of succor to those communities. In this interview with select journalists on tour of the cement manufacturing facility, RABIU UMAR, the company’s Managing Director, speaks on how they give back to communities through their three-pronged programme- Healthcare, Education and Youth Empowerment. He also speaks on the cement industry in Nigeria, Ashaka’s capacity building efforts, impact of government policies on the industry, etc. CHUKA UROKO, Property Editor, was there. Excerpts:
Yours is a very challenging environment, considering the insurgent activities in this area. How were you able to run your business at the peak of Boko Haram hostilities?
On the 4th November 2014, our plant was attacked by the insurgents. Obviously, they were looking for explosives. Exactly one month after that, there was another attack. Of course, the default thinking was for the company to shut down during that period until things calmed down, but the management of Lafarge took a decision to keep it open because, as you may know, stopping and starting an operation is not really a day’s job because you talking about a company with 700 staff and we live in a place that is more or less an island.
So, even if you shut down the operations, the staff would still be here. You can’t have 700 people suddenly pack their bags to go somewhere. Therefore, a decision was reached at a significant financial expense to keep the plant running and I think it was the right decision which has shown that we have the resilience when it comes to keeping our operations running.
Looking at the post-insurgency era, how are you contributing to the redevelopment of this area?
To start with, we make cement and most of the destructions in the area were civil in nature if you take out the psychological and socio-economic aspects. So, naturally, we are contributing in that regard. If you remember that there were more than two million people who were displaced by the insurgents and by virtue of keeping this operation open, you are helping to make sure there is enough economic activity in the area.
Like I said, there are 700 people working here directly and probably another 2, 000 people who do supplies and all. The average household in this area is 10; so you can imagine what the company has done. A more direct approach is helping the communities acquire skills that can be useful in terms of social services and healthcare as well as education.
We have an artisanship training programme, for example, that has intakes from the communities, strictly created for them. Graduates of this scheme go on to set up their businesses. If you are a carpenter or a mason, you get the tools of the trade and can go into the community to start. At the same time, we absorb some of them, the second most senior person on the industrial side, after the plant manager, is a local person from Bajoga, who came through the programme.
We have taken him to South Africa and our sister plant in Calabar as the second most senior person there as well. We look at the contribution from the perspective of our operations rather than direct interventions. We have built classrooms, boreholes and a lot of things but we call those ‘business as usual’ because they are basic things that we do. Building classrooms doesn’t mean that education will happen, so we do more sustainable activities in that regard.
One way or another, your operations impacts on both the environment and the people of this area. How do you give back to the community?
Giving back to the community comes in different forms and sizes. For instance, the focus we have as a company worldwide is healthcare, youth empowerment and education. These are things that everywhere you go, in the LafargeHolcim world, you find that different societies have different ways of implementation but these are the three core things.
In healthcare, for instance, we have a clinic here that sees over 200 people from the community every single day. Both consultation and drugs are free; it is one of the things we believe is important. I just spoke about youth empowerment. We have in excess of 2000 graduates of the artisan training since the beginning of the programme and every year, we keep taking them and we pay them for the two years that they are here. About 56 percent of our staff is from Gombe, 70 per cent is from north east while over 90 per cent are of northern stock. And of course, most of them are from communities around us.
And when you look at education, we have two schools right inside Ashaka and they have over 1000 students and 60 per cent of them is from the community and they don’t pay school fees. I think also that beyond how much money we give the youths, there are also other exchange programmes that we have. A polytechnic is about to start at Bajoga and the reason for citing the school there is because Ashaka exists here. Polytechnics produce hands-on people, the plan is that we will partner with the school to do a lot of exchange programmes.
How do you control your operation so that it doesn’t impact on the environment where people live?
Cement business involves extracting things from the ground, but at the same time, we have a standard. At the LafargeHolcim which is the largest building materials business in the world, the standard is that any country that the company is operating in has low standards, our standard becomes what we use but if it is higher, then we also use it. So at any point in time, we make sure we are well within the standard that each location has.
We have a very high standard; there are different regulatory agencies that we work with, there is the Ministry of the Environment, NESREA and the rest. The key concerns are the dust emissions and when it comes to coal, there is the acidity. And of course, before you even get a license to operate there must be an environmental management plan in place. But beyond that we make sure we have an improvement plan.
A few years ago, you would know you were approaching Ashaka when you find dusts on vehicles but today, that is not the case. It has reduced and we have the number to show for it. We hosted the former minister of environment sometimes ago to see what we were doing. Of course, there is always room for improvement but the most important thing is to ensure that the dust emission is lower than the limits set by the environmental plan.
Sometime last year, you signed an MoU with some communities. How far have you gone with the implementation of that agreement?
The implementation is ongoing. We ran into some misunderstanding. It was actually a law. Everywhere you operate a mining activity you must have a community development agreement which defines the basics of what you must do but you don’t limit yourself to only what is on the agreement. We ran into some issues but it is being implemented while we are trying to do more. Not everything we do is in black and white. The healthcare thing I talked about earlier is not part of the plan but we do it.
It is a five-year programme but what we try to do is make sure that whatever we want to do within a year is done before the year runs out so that the community can start the benefit.
Nigeria is said to be a difficult business environment due largely to government’s actions or inactions. So, how are government policies impacting on your business?
I think there are two levels to it. Government policies in a sense have helped us to operate because without a framework, you cannot run. Is there room for improvement? Of course, there is. One of the key things that is really confusing is multiple taxation because you have the federal, state and local governments. And sometimes, when you stack up everything, it is a bit confusing to understand at what level it stops. Polices are key drivers of business that every business owner talks about in the country. It also brings about uncertainty; you plan something you want to do this year and suddenly, something comes up that is not in your plan but can have an impact on your planning and result.
People say that the price of cement is too high in Nigeria considering that the country has local inputs like limestone. What’s your take on this?
I wouldn’t want to go into that. It is very controversial because there is an emotional and real part of it. And typically, we tend to be more emotional. I don’t want to go into details but it is not quite true that all our raw materials are locally sourced. You can find out how much cement is sold for in Chad and Niger in dollar and make the comparison.
Ashaka is not the only cement company in Nigeria. How do you beat competition in the industry?
The main thing we do is to focus on the customers and make sure we give them what they want. At the end of the day, cement goes everywhere. In reality, there is more supply than the demand but we are focused on making sure that our product does what it says it does. It is not about the technical aspect because, at the end of the day, the customer can measure what he got from the product. Our focus is on making sure we are close to the customer and that we are giving him what he really needs.
For instance, a block maker wants to work quickly and in as little time as possible, take the block and reuse the same wooden palette. So today, we have a particular product designed for that called Superset. It is the fastest setting cement in the country and it means that segment will have preference. If you meet the big contractors, their needs are different from the regular trader who buys cement and resells. So, what we try to do is make sure we work with them from the beginning of a project to know what their needs are and I think that has worked for us thus far.
Lafarge has some programmes on affordable housing in the southern part of the country. What similar initiatives do you have in the north?
It is a national programme, not specific to any region. We are in the process of developing one in this region. Affordable housing comes in different shapes and forms. For instance, you may want to build houses in large scale. So, there is affordable housing and there is mass housing. Mass housing may not be the bottom of the pyramid but it allows more people to really have access to housing. And how does it work? You are building this same structure in a thousand places and instead of using blocks you can use what we call the form work which is one of the things we are working on. We have done one in Ogun State and we are taking people from the north to see how it works because the idea is to copy the model and ensure we can do it quickly and in a cost-efficient way.
How did the lull in the property market affect cement sales during recession?
First of all, Nigeria went into recession and anybody who lives in Nigeria knows the impact. The cost of anything that has any correlation with foreign exchange has doubled. That is the reality. The income left after taking care of basic needs has gone down and, naturally, there is no way it won’t have an impact on certain sectors that are not immediate, like food. And then, of course, the economic situation means that the market is not growing as fast as expected and, I think, that information is available to the public.
People tend to blame housing affordability on cement; to what extent will you say cement influences affordability?
Cement is less than 20 percent of the total cost of building construction. What is the correlation between cement and the cost of building? The global average is six percent; this is verifiable and scientific information. Depending on the building practices, for instance, not everyone uses hollow blocks; some use the formwork. That way, there is a lot of savings. So, there are a lot of building practices that help to bring down price but when you look at the price of blocks and cement, the global average is 6 percent. In Nigeria, it may be 7percent but I don’t think it is up to 8 percent.
Typically, people think that if the price of cement is half of what it is today, it increases affordability or the number of people that can afford to build their own homes. In a sense, you can say yes, but it is only 6 percent.
The rest of the 94 percent is in the finishing. You can build and finish the carcass of your building and you are just 30 per cent of the way including the concrete, beam and all. You find out that the cost of one door will probably build the walls. That is where most of the cost goes.
What is the contribution of the cement industry to GDP?
It depends on the level you take it from, but between N18 billion and N20 billion a year. It all depends on the demand. You can do the mathematics. It was a little higher than the previous years but it dropped.
Maiganga community is about 145km from here and that is where you mine you coal for fuel. How do you cope with transportation?
We have two mines. When you hear mine, it is coal. We have quarry here in Ashaka where we get the limestone. You build your plant where you have your limestone. We use a lot of it to make the cement and we need fuel like coal and it is about one tenth of the limestone. If it was limestone we needed to move, it won’t make a lot of economic sense.
So, limestone is here, it is coal we are getting from Maiganga. We are 1, 500km away from the coast of Nigeria and when there is a challenge of fuel, people can import but we are here in a landlocked place. So, we must have a different source of energy. Again, there are gas pipelines but Gombe, Benue and Sokoto states do not have. Everyone else is linked. Gas is much cheaper but we don’t have a link to the pipeline. That’s why we need to find a solution that is local and coal happens to be one.
The other one is linked to a project that we are doing. It is at the starting phase. We are starting an agricultural programme called Agric-ecology. It is all about mixed breeding.
By doing this, you take the ecology of agric process back to its natural way. In a sense, we are going to roll that out to empower our communities and help increase their yield by up to 30 or 40 per cent. It means they can generate more revenue from one piece of land.
The other is, helping them to organise better and helping them to organise distribution in terms of what they get from the produce. There has always been the issue of farmers not getting value for their labour, so, we are doing this to help them to get more value from their farming activities and turn it to an all year round thing.
We are starting a pilot with tomatoes because we hope to start with cash crops. The farmers won’t have to just wait for the rain. That’s what we are working one and the pilot will start this year.
The second part of that is linked to how we help control our CO2 emission. The Federal Government tries to encourage rice farming everywhere, so the rice husk, a by-product of rice processing can be use in our kiln which can burn anything. We call it geo-cycle. The idea is to take corn cubs and the rice husks to produce clean energy and at the same time clean the environment.
The producer doesn’t go to the farm to produce rice husks or corn cubs but at the end of the day he makes more money in addition to what he makes from the produce because we buy it off him.
Every organic institution like yours has its projections. In the next five years from now, where do you hope to see Ashaka Cement in terms of expansion?
In the next five years, we see Ashaka as a more efficient business and this is from the cost perspective. There is currently a project ongoing. We are building a power plant to be able to generate our own electricity. Today, we are relying on generators as you know the cost of fuel. Whether it is petrol or diesel, it is very high and has a high correlation to foreign exchange.
We are building an N11 billion power plant that is a 16-megawatt project aimed to cater to our needs. That is one of the biggest plans that we have in terms of being able to reduce our costs. One of the biggest costs in cement production is the energy cost. Inside the kiln, we have temperature running up to 1,400 degrees which is up to the heat used for steel. You can imagine the kind of heat we are talking about here and to generate that kind of heat, we need fuel.
The second is to unlock some of the existing potential in terms of capacity. Over the years, you lose some efficiency and we are trying to regain that efficiency. The other is, depending on how things go, we intend to increase the capacity of the plant by building new capacity.
