STRENGTH OF STEEL

Nigeria 2020 | INDUSTRY | VIP INTERVIEW

TBY talks to Kassem Ajami, Founder & Managing Director of SABA Steel Industrial Nigeria Ltd., on the innovative pre-fabrication of warehouses, investing in Nigeria, and the need for better infrastructure.

How has the company evolved since its establishment, and what are your current projects?
The company started in 2005, but kicked off in 2007. It started with limited capital and a small loan and evolved with hard work from a trading to a manufacturing company in 2011. Today, we produce flat products, pipes, doors, angles, and channels. We are currently constructing another factory, the pre-engineering building (PEB). We have factories in South Africa, Egypt, and Ghana involved in the pre-fabrication of warehouses. PEB is completely different from normal warehouses, as it reduces costs by up to 30%. It is modular, and because of the design of the warehouse, it costs less and is more efficient. Nigeria still uses the old traditional system, and PEB can build buildings up to nine or ten stories, all modular, and they can be offices all in steel or designer containers for coffee shops.

Who are your main clients currently from the first factory?
Our clients include construction companies, medium steel fabricators, traders, builders, refineries, and sugar refineries; everything made from steel is produced in the first factory. With the second factory, the new engineering that we are putting in place will reduce costs by 30%. This technology exists in Europe and the US, and Eastern Europe, and proudly we can say we are the only one in Nigeria. We seek to stop the imports of these finished, modular PEBs. We are doing it from scratch and directly with clients, and it is certainly faster. For example, constructing a building with concrete will take two years, while with steel it can take six to eight months. Our market share varies between 35-43% depending on the item. There are some items that we are strong in that we are fully focusing on.

Was your expansion in the second factory all funded by internal equity?
Everything was funded internally. We believe in Nigeria and see great opportunities here; however, one has to invest in Nigeria to earn market share. We are borrowing locally. At times during the crisis, we faced problems in terms of interest rates that reached 25%; however, we were able to overcome that even though we suffered losses. We reinvested because we believe in Nigeria's future and made sure we raised capital again.

What other challenges are you facing?
Electricity and infrastructure represent 15% of any initial capital. For example, for a project for NGN20 million, one has to invest at least NGN4 million in power, which is not the case in other countries. We are also affected by delays on the road when importing raw materials; it typically takes three to four days to clear your goods, but it can take up to three to four weeks; hence, there are high costs and extremely low margins at these times. Because purchasing power is low, one cannot transfer the high costs on to the consumer, which effects to extremely low margins. The last two to three years have been difficult, though we are sustaining and trying to grow with more investment.

What can be done to improve this situation?
The government has to work on the challenges; the solution is to implement PPP for electricity and roads. This is being implemented to some extent, though it must be done on a bigger scale and laws must be put in place for investors to come. By 2035, Nigeria's population will be 350 million. Where else in the world can one find such an emerging market? Now is the right time for people to invest in Nigeria. We need the right policies so that people will come.

How do you see things changing with your import substitution?
For things to improve, we need to invest more. During this tough time, we are persevering and still investing. We are willing to invest even more because there is potential. We are now focusing on neighboring countries for export. If the roads are improved, they will all come here to Nigeria to buy.

What message would you send to the international community about doing business in Nigeria today?
With the media abroad, the news on Nigeria is negative, and this has to change. In the industrial areas in Nigeria, such as Lagos, Port Harcourt, Warri, and Abuja, we do not feel these things. The problems are in remote areas. Now is the right time for investors to come. We have reached the bottom and will only be going up now. There are opportunities here for all sectors of business.

What is your outlook for SABA Steel Industrial Nigeria in 2020?
With the start of our new project, Metal Berg Manufacturing, and the expansion of SABA Steel Industrial Nigeria, 2020 will be a better year for all businesses. The policies that the government has implemented in the last five years will make 2020 better than 2018 and 2019. The golden years of USD100-110 per barrel are gone; we should target USD40 per barrel and focus on surviving, improving, and exports. In 2020, we will look more at exports. However, we are in no rush. Once a company starts thinking of moving money out of Nigeria, this is when they start rushing. If we view Nigeria as home, we will start looking at Nigeria differently and see opportunities Nigeria must be home no rush with long view, this is a message to Investors.