Chairman of Sona Group of Industries, one of Nigeria’s biggest manufacturing chains, Arjan Mirchandani, is worried because of an inadequate policy framework to support growth in the manufacturing sector. In this exclusive interview with Olusola Bello, he gives insight into his multi-billion naira expansion projects in Nigeria and insists that Africa can be self-sufficient if the investment is encouraged with sound policies. Excerpt:
It is amazing the quantum of investment that you are making in an economy that is struggling. What is the secret?
I think some businesses are struggling maybe because they are not producing quality goods. Manufacturers who don’t produce quality goods will definitely not survive. Nigerians are very clever and they are people of taste. They understand the value of goods. If you introduce a good quality product, the packaging is good, and the presentation is good, Nigerians will buy.
Now, there is a restriction on import and when you have such people turn to local alternatives and we are providing those alternatives. That helps us to understand people and what they demand and when the demand increases you naturally have to expand to see that you satisfy the consumers.
Again, imported items are disappearing from the shelves and the sellers are running to us. For instance, many people used to import biscuits from India, but they no longer import because of forex problems. They come to us and demand that we produce biscuits for them. You can go to some of the Indian shops and you’ll find our goods. So, the demand is there.
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You have invested so much in the Nigerian economy. What is the attraction and what is the cumulative net worth of your investment in Nigeria?
Talking about network, everything belongs to God. Nothing belongs to me; I am only a trustee. We didn’t bring anything into this life and we are not going to take anything with us when we die. Whatever I have is from God.
The question should be how banks and government policies can help? The government must make policies to help to manufacture. In my opinion, such policies are lacking. The banks charge 22-24 per cent. How do they want manufacturers to survive with such interest rates? Banks are not even giving money without 100 per cent bank guarantee. So under these kinds of conditions manufacturers cannot survive. Today, we work with India. India gives three per cent on loans. Manufacturing is easier that way because the cost will be cheaper and we’ll be able to export more. So I think government policies are important to help.
Can you talk about the installed capacities of your various businesses and actual capacity utilisation?
We are looking into export. We started this year and we can see that export is growing. We see everyday growth. We started in Ghana but we now export to Burkina Faso, Cameroun, Senegal, and Cote d’Ivoire. I can see that there is a demand and that is why they are coming to us. Africans need to buy from Africans. Africa should get out of the mentality that only foreign goods are great.
How are you tackling the challenge of cross-border transportation?
I must admit that borders are difficult. If the borders become a lot easy to cross, I am sure we can export more and the cost will come down. But, again, every business has its own challenges. Challenges will always come; they are nothing new. Every good thing has its own challenges.
How huge is the market?
The market is huge and we can expand to twice as much as we are doing now. That is not a problem, because the imports have been restricted. People used to bring in goods from Taiwan, China and other countries; but today they are not able to import due to forex problems.
You are making huge investments in new technology and human capacity development to meet the rising demand, tell us about it?
Today, if you don’t have a plant that is fully automated people will not buy your goods. You cannot produce goods anyhow and expect people to buy. People are very clever. In any case, somebody is paying the money and he has to see what he is paying for and he has a choice because there are other manufacturers. That is why we had to invest in technology to produce quality and to mass-produce in a way that the cost of production will reduce.
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There has been a huge growth in the biscuits market lately. What is driving that growth?
It is not just a taste. We are very careful. We used all local raw materials. We make cashew, ginger biscuits. Ginger is local, it comes from Kano. Again, the malt extract that we use for biscuits is produced by our sister company and that replaces sugar. So we don’t have to import sugar. It is much healthier.
Most of your raw materials are agro-based, are you therefore also thinking of venturing into agriculture/farming?
We are encouraging local farmers because they also want to survive. We want them to have that understanding that we are buyers. We believe that we should encourage the farmers by paying them for their products and allow them to grow. We are looking at ways by which we can help them to increase their yields by teaching them what kind of seeds to plant. We have the IITA in Ibadan and we work with them to help the local farmers. We believe that is the way it should be.
You are building what is said to be the largest ethanol plant in Africa, what is driving that investment?
You have so many other industries that require ethanol and they are all importing; if we can produce ethanol here locally we can supply better, cheaper and quicker. Then, they don’t have to wait for 100 days for their goods to arrive and they don’t have to go through foreign exchange problems. Everybody will like to get local products that they should have normally imported. That will help the economy of the country. We are doing the same things in so many other areas. For example, we are producing malt extract here and so many other biscuit companies are buying from us and using it in the place of sugar, which is imported. We have huge orders, we cannot meet the demand.
You emphasize global standard quality production at each of your businesses, how do you manage to achieve that despite the difficulties of this environment?
I think difficulties are within us; we can solve them. It is not a problem. I believe if you are manufacturing goods and you are not giving quality, people will reject them. Number two, you must comply with international regulation for you to be accepted in the export market. You have to put in efforts to comply. People who want to buy want to come over to the factory to see what our practice is, whether it is the normal practice or international practice; is it going to jeopardise the interest of the public? So, we need to be updated because the world is a global village. Manufacturers need to do something to ensure that they comply with global quality; otherwise, the export will be very difficult. Multinationals like PZ, Guinness, Nigerian Breweries and others keep placing big demands because we meet their quality specifications. If we don’t they won’t come. We work to gain the confidence of these companies.
When is the ethanol plant going to be operational?
We are looking at about two months. Right now, they are putting finishing touches to it. We will be able to supply a lot of companies like pharmaceutical, food and drinks. And, I will like to see that they each get a good price.
Your rice mill is in Ghana, is there a chance that you will replicate what you are doing there in Ghana in Nigeria?
The future nobody knows. But we are doing what we consider best in every market. I love the people of Ghana. Africa, to me, is great. God created all as one but the fact is that what we are doing here is not in Ghana. We always look at the opportunities in each market to make investment decisions.
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What would you say governments are doing right and what are they not doing right in terms of policies?
I still think that the government can give more concession to industries that are doing the right things, and are using local raw materials. They should help them to grow more. Charity begins at home. If the government can encourage such industries, Nigeria will be self-sufficient. And Africa will be self-sufficient because if we have goods here we can supply neighbouring countries and they will depend less on imports.
Where did your inspiration for these great things that you are doing come from and how did it all start?
Inspiration is within you. If you decide that you want to be fruitful, that is the best decision you can make. This is because no one knows the day he will go out of this world. So, if you don’t use your day properly, you have lost it. That is where the inspiration comes from. It is about doing something good to help everybody. If God gives you a brain, you must use it. God gives us a timeline to use our talents properly, when you do that, God multiplies your efforts. That is my guiding principle. When you have a good motive to help people, God will help you 100 times.
There was a tour of your factory by a bank. Why?
Of course, they are looking for customers. You could see that they are impressed by what we have done, but they are not lending. But we are still talking to them. They are saying they can’t give loans for less than 21-22 per cent because the government lends them money at 17-18 per cent and, as such, they can’t lend for cheaper. So, it’s a policy issue that the government must look at to reduce the cost of borrowing.
Exiting recession by Nigeria is good news for manufacturers, but would you say the purchasing power of consumers has increased and is driving demands?
I think purchasing power is reducing because salaries have remained the same. Obviously, poor people only buy necessities and that is normal.
How come you are expanding your investment rapidly if this is the case?
We are investing more because we feel that Nigeria requires these jobs and population is always growing; and, again, we have now embarked on export and when you export you need excess capital. We must export. Nigeria is a big market, but we have other markets around us. In those other markets, we have people who also need our products for survival.
