Managing Director, Pel Extract Limited, Linus Kotey and chairman of the Lagos State Small Scale Industrial Estate, Matori, Lagos, in this interview with Simon Ugwu, speaks on issues affecting manufacturing industry. Excerpts
About Pel Extract Limited.
We are producers of wines, food drinks and spirits. Some of our brands are Capri aptizers, Pel aptizer, Rubby red wine, Casablanca, brandy , pel light drink soda to mention but a few.
Pel Extract Limited is located in Mushin, Lagos. Our company is mainly into Alcoholic Drink, Beverages, Drinks and offering Alcoholic And Non-Alcoholic Drinks.
How has it been accessing the CBN facility for SMEs?
I think the banks have their own criteria of accessing the loan. But I think that is a way of keeping the money longer in the bank. I have not seen many who accessed the loan. This is an estate of about 37 occupants. That means something is wrong somewhere. The government should ask the banks why have they not disbursed the loans? May be, they will seat up.
Power and business operation
Power has been a long standing issue. it also has affected our adaptability of business. If you have something to do, for example, when you want to carbonate health products, you need cooling facility, but when there is no power, how do you power the cooling facility? You will adjust your plans and start doing something else. It affects the stability of business apart from affecting profitability. It is something that has been there; and it affects business really negatively.
We have to rely on generator with the exchange rates now, generators are much more expensive and their parts are much more expensive, even for diesel. When generator is on you, have not started production when it breaks down, then, you are in trouble, you have much problem on your hands. The cost of the diesel is reducing now. This will help, but the major issue is stability of power supply. If one can predicts the availability of power, for example, between 9am-5pm, you will have power supply, then, you know you can plan, but the situation whereby it goes off; and you don’t know when to expect power supply again you have a problem.
Assessing improved power supply
There was a time we saw improvement in electricity supply; and we were clapping, but lately, it has gone back to that situation where you cannot predict. Even though we hear that generation has gone down as a result shortfall in gas supply, the situation has almost remained the same.
Predictability is a very big factor in the manufacturing industry; when you cannot predict, you have a problem and that is the reason some factories decide to forget about DISCOs and GENCOs; and, instead, generate their own electricity. But small business are not able to do that, so, it is either you use your generator or factor product lines that don’t require too much power.
I will say looking at the size of Nigeria as a country and the available market, what is negatively affecting businesses with regards to transportation is that the rail transport is not there. Without rail transport, cost of transportating goods will always be high. For example taking a carton of wine from here in Lagos to Benin cannot cost less than N150.00 per carton, so, your margin is gone. You may be recording sales but you don’t make profit. The easiest way to move goods from one place to the other is rail transportation. Until we have that, you cannot talk of distributing goods effectively and taking advantage of the vast market available.
I am a professional brewer. Once you have the entrepreneurial spirit, you will always try your best to hang on in the business, hoping that it will get better. I have a lot of colleagues who have given up. I don’t want to give up.
We are veering more into the spirit line, like brandy, gin and things like that. Talking of alcoholic brands, we make sure that our products are cheaper than our competitors’ products. We have also been doing some contract production in the area of food drinks and water production to keep the factory running. There are very many other products we are interested in but the cost of importation of the raw materials make it difficult for a small business to go into it.
The major challenge is access to finance. It is a re-occouring challenge but it is more expedient that we have access to finance now. Genuine producers should have access to finance. Once there is access to finance, one can think about new types of products lines. One should always make sure that 80 per cent of the raw materials are sources locally, then 15-20 per cent imported. You must be able to import the raw materials and stock them so that you will not run out of the materials in order to produce continuously.
Advice to CBN
The Central Bank of Nigeria (CBN), being the owners of the fund, the CBN’s N220 billion set aside by the apex bank for MSMEs and being in position to translate the government objective should monitor the banks to know how much was disbursed to the MSMEs; because that is the objective. And if necessary sanction some banks why they have not disbursed the funds. They should have a way of monitoring the number of applications that are submitted to these banks and how many applications treated and disbursed.
Advice to Discos
The DISCOs should do more with regard to power distribution.
The distribution companies should do a good work with a good spirit in the power distribution areas. Power certainly is not everywhere, but they should ensure that there is power supply in industrial areas from this time to this time so that they can plan their production along with regards to when there would be power supply. They should give more predictability. This will enable them to generate more income. It is cheaper getting power supply from Discos than providing power supply by oneself by running generator.
The government should make power supply a top priority in order to encourage independent power supply so that captive areas can generate their own power and run it.
The gas supply should be given more attention. So, also addressing the issue of vandalisation with regards to developing a means of monitoring the vandals so that there will be enough gas to supply generation companies. It is worthy of note that the issue of pipeline vandalisation has stopped for some time now. This will help the generating companies and the economy to grow.
I think one should first have the entrepreneurial spirit; so that the person can endure and go to an area well known to him/her. Be sure you have the expertise of the area you are going into so that you can be flexible and be marketable.
The Federal Government should bear it in mind that people need job. It is paramount empowerment of human existence to earn a living, feed your family and live a decent lifestyle.