The latest moves by the Federal Government are likely to further depress, rather than revitalise, the critical steel sector of the economy. While yet another management arrangement is unfolding at the Ajaokuta Steel Company, the Delta Steel Company, Owvian-Aladja, is set to be sold to an automobile company. The imperative of privatisation is very urgent, but the bane of our steel industry, corruption and deliberate bungling of the process, must be reversed to achieve the objectives of industrialisation, export trade promotions and job creation.
Based on bitter experience, Nigerians have every reason to be apprehensive of the latest official gyrations. The Minister of Mines and Steel Development, Mohammed Sada, while defending the ministry’s 2015 budget proposal at the Senate, stated that DSC would be sold soon to an automobile company. The alarm bells provoked by this missive were still ringing when news emerged that sub-Saharan Africa’s largest steel plant, ASC, is likely to be handed over to another shadowy consortium to manage on behalf of the government. It is unusual for a vehicle assembly firm to buy a steel plant!
We have long argued that the only strategy with a certainty of a successful outcome is an outright sale, transparently and in line with global best practices, of the public steel plants. Our government’s management of state-owned enterprises has broken world records in corruption, ineptitude and waste. The immense sums that SOEs generate for officials and their collaborators act as a powerful incentive to continue to hold on to them under any guise for as long as possible. Where this no longer suffices, they ensure that their privatisation is bungled to keep away global leaders and pave the way for hasty consortiums floated by fronts and their little-known foreign “technical partners” to grab SOEs on the cheap. Invariably, these consortiums lack technical, managerial and financial capacity to bring in the much-needed Foreign Direct Investment and create jobs.
According to Sada, the Assets Management Company of Nigeria had “perfected arrangements” to sell DSC to an “automobile firm.” This is doubly revealing: First, AMCON took over DSC from the incompetent investor to whom it had been sold after it could not service its debts. Second, it emerges that an unnamed automobile firm wants to buy the steel plant. Media reports did not indicate that senators asked for the identity of the auto firm, a typical dereliction of duty that has been the hallmark of our parliamentarians. The firm should be named to enable lawmakers to determine its capability to run the steel plant since the privatisation law allows the government to recover privatised non-performing assets and re-sell them. There are no vehicle manufacturers in Nigeria, only a few assembly factories and we wonder what technical capacity an assembler will have to run a complex steel plant. We should never lose sight of the ultimate objectives of privatisation, which are to end public expenditure on commercial enterprises, stimulate productive activities, attract foreign and local investment, create jobs and boost exports. Corruption is preventing these from being achieved in the steel and power sectors.
At Ajaokuta, a Chinese firm, Henan Taihang Quanli Heavy Industry, says it is in partnership with a Nigerian company, Total Steel Limited, aiming to revive and manage the steel complex. Its representative, Huang Quanli, foresees a Public Private Partnership model with his firm and Total Steel as core investor and operators of the plant “say for a term of 15 years” in the first instance.
We object to another cavalier round of experimentation at Ajaokuta. Several successive management teams had been hired for the plant that had cost the taxpayer over $15 billion by 2011. They simply went in to strip it of assets while the government continued to spend billions of naira on a drain pipe. Kola Belgore, Chairman of AMCON, told a shocked nation last year that the government was spending huge sums each month on the complex.
Government must put on its thinking cap. World steel production has undergone transformation with the West giving way to China to emerge as the world’s largest producer. A functioning steel industry is essential to industrial take-off. Nigeria’s grandiose ambitions spelt out in the Nigeria Industrial Revolution Plan, National Enterprises Development Programme and its untidy automotive plan are non-starters without a viable steel industry.
Steel drives the automotive, ship building, construction, railways, mining and other industries. It will stimulate mining in iron ore, manganese, silica, aluminum, coal and associated minerals which are used as raw materials and in secondary industries. Phase 1 of Ajaokuta alone was conceived to employ over 10,000 workers directly, another 20,000 in raw materials industries, 30,000 others in industries that use its products, thousands more as suppliers, artisans, and providers of services, not counting those engaged in mining. The Deputy General Secretary of the Iron and Steel Senior Staff Association of Nigeria, Adewale Okesola, estimates that 140,000 Nigerians would be employed if Ajaokuta, DSC and other steel plants are revived.
Ajaokuta should be transparently privatised to a global player as core investor. No local operator currently has the capacity to fund and operate it competitively in the face of Chinese excess production and when major producers are scaling down or consolidating their holdings. The Bureau of Public Enterprises should work with AMCON on DSC, while an enabling environment should be created to attract FDI into the mining, connecting railways, coastal and inland ports and dredging projects envisaged in the steel sector master plan that produced Ajaokuta, DSC, rolling mills in Jos, Osogbo and Katsina and the iron ore company at Itakpe, Kogi State.
China’s and South Korea’s industrialisation was propelled by careful planning and policy consistency anchored on steel. By 1989, South Korea had become the world’s 10th largest steel producer, while China overtook the United States, Japan, Russia and Europe by 2005, accounting today for one-third of global output.
Only a truly transparent privatisation of all state-owned steel assets that will attract the world’s best companies can provide a take-off point for industrialisation here. All other moves are likely only to prolong our agony as an import-dependent economy.
