FX shortage hurting businesses in Nigeria — Krones managing director

Helmut Rumm, the managing director at Krones, an industrial machinery & equipment manufacturing company, shared his experience from doing business in Nigeria for 20 years and why Nigeria remains an attractive investment destination.

In an interview with BusinessDay, Mr Rumm also spoke about the negative impact of dollar shortages and insecurity on businesses operating in Africa’s biggest economy as well as how Krones is dealing with the challenge of talent flight.

It’s been 20 years of doing business in Nigeria. How does it feel to reach this milestone for Krones and for you?

I am thankful because after all these years, I believe it was the right decision for Krones to open a subsidiary here in Nigeria. We have come a long way but I believe the best time is still to come for Krones.

What are the major challenges you currently face doing business in Nigeria?

I think like every business, we do have challenges. However, one of our biggest challenge is the struggle to source FOREX from the CBN. That did not start today, but it has become even more severe in recent times.

It has slowed down our business and has made the cost of doing business very expensive for us and our customers. It is very hard at the moment.

How do you operate in that difficulty to ensure that your customers are served and your business continues without wobbling?

There isn’t one way to manage it, and the truth is you need a working setup here; a very good finance department, and an operational team to work with you. You can’t have departments working as islands which probably will still work very efficiently in most countries in the world; but here in Nigeria, the different departments have to work hand-in-hand to understand each other’s problems and work as a team.

You’ve talked about the challenge of sourcing forex. Are there any other challenges that you face while doing business here in Nigeria?

Of course, the overall security levels are very disturbing. We have over 60 engineers who travel every day around Nigeria and these trips are done on red alerts.

That is not only for the engineers who are traveling but for every single employee. Just a trip in the morning to come to work and go back home is a challenge, and everyone experiences it.

It is even worse if you get investors into the country to see what’s happening. From the airport till the point of traveling back, they may be going out with an impression that may not necessarily reflect the potential of this country.

Another one which we experience now, especially in the last year is talent flight. Our problem is not so much that we are losing employees to other Nigerian entities, but we are losing them to England, Canada, America, etc.

Most of these bright young people who with their families have a feeling that they need to relocate abroad to guarantee some security for their families, do not wish for very much. It’s just electricity, water, drainage, and that a child can go to school in the morning, and come back without you nursing a fear the whole day of what could happen. Anyone who has kids understands what I’m saying.

Talent flight over the last year has increased dramatically.

You are losing people, as you say, not to your local competitors, but to Europe, and America. How do you cope?

I think the first step is having a robust retention program. You create an environment in the company where the employees feel safe, not threatened, and feel like they belong to a family. That is how we are supporting each other.

First, it is by creating a positive working atmosphere for our employees.

Also, we cannot prevent people from looking for greener pastures somewhere else, so, we must ensure that we keep getting fresh talents into the system and trainingthem up to our high level of operation.

There is a lot that people should learn about how to operate and work in this environment. They also need to learn what integrity really means.

We have an opportunity for a change in government on May 29, 2023. What are the top three areas of focus you would like the president-elect to prioritise?

First on the list is still forex availability and a single exchange rate. That is definitely the most important for any kind of business, especially international businesses in Nigeria. Number two is the security level in the country, not only in the North but in every single state in Nigeria.

And I think to attract investors, we need transparency. To be transparent in how tax money gets spent and how it will get used in Nigeria to increase the facilities, schools, hospitals, road constructions.

In 2020, the COVID-19 pandemic caused a lot of economic setbacks. But several companies have bounced back since then and are posting larger profits. What has been your experience, and would you say your business is in stronger shape today than before the pandemic?

The answer is yes. We are in a stronger shape today because we never stopped operations. We were always present with our teams – during the worldwide crisis. We were here for our customers and they could count on us.

What are your plans for the future?

We have exciting new products like our “skip and run” technology that will benefit our customers in terms of cost savings and energy efficiency in their PET bottle production units.

Our low temperature equitherm technology for breweries will cut down energy costs for new breweries and can be retrofitted for existing breweries. Our continuous investments not only in beverage and recycling technology, but also in our local infrastructure like our local consumables manufacturing plant and our solar energy project, enables us to approach the future with confidence.

We’ve seen solar panels on some of your roofs. How do you manage the challenge of power supply as well as the push towards greener, cleaner energy?

As part of Krones’s ambitious sustainability strategy, we have set climate goals for the future. By 2030, we hope to achieve 80% fewer greenhouse gas emissions from what we call scope 1 and 2 sections of our business. These refer to the emissions at our company sites for example emissions due to vehicles, production systems or purchased energy.

In Krones West Africa, our investments in solar panels spanning 2,746Km2 of our roof space will ensure that we can sustainably produce 546KW of energy at its peak, with an additional capacity to store 830KW of energy. This development allows us to manage the challenges of power as it means we will no longer rely on the power grid to run our day to day operations.

Are you switching off generators completely here at Krones Nigeria?

We will basically be off-grid by the 2nd half of this year. We currently run on solar during the daytime because, the storage batteries are yet to be delivered. Afterwards, we will start running the whole office overnight as well.

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There’s the Agrofood expo happening later. What story do you want to tell about that?

The 2023 Agrofood seminar will be a wonderful opportunity to say than you to our customers for their loyalty and dedication to Krones for the past 20 years. We always look forward to connecting with our customers to share the latest and greatest of all things Krones but this year, as we celebrate this unique anniversary, we are keen to show our gratitude as technology and service providers. We exist to serve them and we feel blessed for the countless opportunities given to Krones in the West African region over the past 2 decades.

Our special exhibition seminar will focus on our recycling solutions and the Krones approach to a circular economy, as well as the impact of Krones’s Digitalization solutions for the future.

German companies invested about £2 billion in Africa in 2021. What do you think will be the trend going forward if we are able to get our acts right and what do you think is possible in terms of how much investment we can attract to Nigeria?

As I mentioned earlier in the interview, the best is yet to come for Nigeria. The sky really is the limit. Nigeria has an amazing youthful and constantly rising population. Nigerian intellectuals can be found everywhere in the world and the human talent in this country is simply amazing.

With better use of its natural resources, we can only imagine that the next 20 years would be full of wonderful opportunities that can be tapped into by investing early. Now is still not too late. Krones will continue to invest locally as can be seen by recent investments, as we truly believe in the people and the potential of this great country.