Nnamdi Nnodebe is the managing director/CEO of Sonia Foods Limited, a Lagos-based tomato processor. Nnodebe re-processes tomato concentrate and packages it in tins and retail packs. In this interview with ODINAKA ANUDU, he says that the Federal Government’s new tariff regime on tomato concentrate is a red flag to local industries.
The Federal Government recently came up with a new tomato policy, raising duty on concentrate from five to 50 percent and imposing additional levy of $1,500 on each metric ton of tomato concentrate imported into the country. Do you consider the policy good for the industry?
Well, I am not against the government policy, in a way, but I am against the tariff and the levy.
Why?
The timing is wrong. As at today, no company is producing triple concentrate in Nigeria. It is only one company in Kano owned by ASCON or Dangote that has the capacity to do so. They have the machinery, but they are not yet fully operational. They are facing a challenge with fresh tomatoes because they are not getting sufficient tomatoes from farmers. I advise the Federal Government to, first of all, embark on educating out-growers in order to teach them how to increase their yield. As at today, farmers are doing five to six tons per hectare, but in other countries farmers are getting 50 tons and above per hectare. Why farmers are getting few tons here is because of insufficient knowledge of application methods. You may give them the right seeds, the right fertilizers but they if they do not know the right application, they may end up not achieving anything. Government needs to look at improving yields. By the time they start getting the yield, they can sell at N20 per kg of fresh tomatoes so that the likes of Dangote, who we will want to buy triple concentrate from, will get fresh tomatoes.
But what is the big deal in producing tomato concentrate locally?
You must have the right specie of fresh tomato. Every fresh tomato you see today has a minimum of 94 to 95 percent water content. So by the time you evaporate the water, you have only five to six percent left. So, if a farmer is getting only six tons per hectare, with all the resources, trucks, fertilizer and every other thing, they cannot sell to Dangote below N40 or N50 per kg. How can Dangote then survive? The major problem we have is the out-growers. If the government can help them, educate them to make sure they have higher yield, all these issues will disappear. You won’t even need to beg foreigners to come and invest in Nigeria because they will come on their own.
If they are getting 20 tons per hectare, they will not sell above N20 per kg and they will make profit.
So to whose benefit is the policy? Why should government impose tariff if it is not sufficiently convinced that it is being produced locally?
I only know one factory in Kano that makes concentrate. I have been in this field for 10 to 15 years and I know what everybody is doing. There is no other triple concentrate factory except Dangote’s. I have travelled to different countries and studied tomato. You cannot set your factory beyond 60 kilometres from the farm. Based on my experience, you cannot set up a concentrate factory 1000 kilometres from your source of supply because 90 percent of what you are carrying is water.
How do traders in Mile 12 Market and other markets get their fresh tomatoes?
They are buying in bulk. If I set up a triple concentrate plant today, I will be looking for water content. Tomato paste is a substitute to fresh tomatoes. If those buying fresh tomatoes have an option of getting them throughout the year, they may not buy paste. What they are selling at Mile 12 is above N100 per kg. By the time you buy it at N100, evaporate water and throw it inside water, what do you get? I am not saying that we cannot do triple concentrate here, but what I am saying is, let government support out-growers so that their yield will go up from five to six tons to 50 tons. They can get 60 tons with the same resources.
Is it that government did not carry you along before the policy was announced?
The government did not carry us along. We are the packers. They are raising the tariff on concentrate yet there is only one company producing it, which is not fully operational now. So who are they protecting? This happened last year. Few people said they were producing concentrate, but at the end of the day they blamed ‘Tuta absoluta’. What the people are looking for is to get quota from government and be importing and giving those importing concentrate. We, the parkers, are the ones re-processing triple concentrate. Government needs to look at our machineries. If there is a quota, we are the ones that should have the quota because we re-process concentrate.
So where do you play in the value chain?
We are the packers. We are the ones that are supposed to take triple concentrate from Dangote when he starts. What we need now is the connection. So we re-process and bring down the brakes from 36 to 28 percent. We package in tins and sachets for consumers. If they kill our company and the yield rises and Dangote starts, who will be the off-taker then? So let the government solve the main problem.
But at what point did government leave you behind?
As a part of the value chain, government should have called those that have invested money. But they met some people and decided on the tariff and the levy. We have been here for over eight years without closing down our factory. We pay a minimum of N10 million in wages every month. We have 224 workers on Sonia Foods’ pay roll. I don’t know why they want to penalise processors and packers. I don’t know who they are trying to protect. Now I want to buy concentrate, where can I buy it? It does not exist. Farmers need good seedlings, good fertilizers and good application.
You told me some time ago that you were investing in backward integration. How far have you gone?
I am interested in it, but no right-thinking person will buy buses and put in stations when he does not have passengers. If I am in a position to advise the Central Bank of Nigeria (CBN), I will advise them not to give money to anybody to buy machinery for tomato till we can solve the problem of out growers. If they increase their yield, others will key in. Let the government support the out growers.
Importation of tomatoes in retail packs is not affecting me because those who import them pay high tariff than me. I only pay five percent for concentrate. If my product is cheaper than imported products and I am not selling then I have a problem.
As a matter of fact, you cannot stay in 12 plots of land to do it. The washing, sorting, grinding and all that need space. Where is the conveyor belt? Where is it channelling the water to?
You told me some time ago that you would spend $15 million on imported machines. Have you brought in the machines?
When I look at what Dangote is passing through, I shiver. The major problem he faces is lack of fresh tomatoes. We have to, first of all, help him and make sure the machines are functional and others will key in.
How have you been getting dollars to import concentrate?
Some of our suppliers give us credit. Some buy some products locally here. Some buy aluminium and wood here. That makes it easy for a transaction. We also source dollars from the parallel market to augument.
So how has it been?
Do I have a choice? Government convinced us to create a job here. I can join those importing finished produxcts. After putting up this structure, they are now frustrating us, starving us of raw materials. Tell me why tariff for raw materials is more expensive than champaigne, except there is something wrong. They are the ones that asked us to set up a factory, but this same government is asking us to pay $1,500 per ton. If you have 20 tons, you give the government $30,000. What do you think will happen to the consumer? Are you helping the masses, when am importer of champagne stil pays 20 percent duty but a raw material for tomato is 50 percent and $1,500 per ton?
