Nov. 13, 2013
Endangered Business
Dear Sir : Recently, a major newspaper carried an editorial about curious moves by the Federal Government to protect auto assembly plants. That seems to be the trend nowadays, for the government to protect some line of businesses while endangering others.
This write up is about how government endangered businesses in Nigeria, using importation as a case study. I will draw heavily on my experience. There was a time, when it was common for businesses to import CBU, (finished goods) but the government in its wisdom made it unattractive by widening the tariff between the finished products and CKD. It is an indirect way of encouraging import of CKD, thereby creating opportunities for sub units locally. Ordinarily this is commendable, but this is where it ends. It now gets complicated and let us examine why.
First, in order to import CKD, and feed the sub units, you need to apply to the Minister of Finance for a special import permit. The Minister through the internal bureaucracy will in turn hands you a long list of requirements, which ordinarily should not be an issue, but considering that 2 officials will be sent from the Ministry in Abuja to Lagos to inspect “your factory” and thereafter recommend your factory for approval.
Before the approval, you are expected to have applied and joined Manufacturers Association of Nigeria, because members of MAN are the only privileged bonafide importers of CKD into Nigeria. Here again the approval does not come that easy, because MAN, will also schedule another round of inspection to see that you have a “functional factory,” thereafter they write their reports. The board of MAN sits to approve or reject your application.
Don’t let us even go near the cost implication of membership of both membership of MAN and FMF approval. Assuming that you are lucky to scale MAN and FMF, your approval is now forwarded to the department of customs where you pay another round of fees because FMF has sent your approval to them. It is like sending your head to the guillotine. It does not end here. It gets further complicated.
You now go to the bank to open Form M, and as it is customary, you must attach a SONCAP application to your application, and you promptly proceed to Lekki Zonal office of SON, where your factory is scheduled for inspection, and you have to pay the “mandatory” and not statutory fee for inspections and approvals. Again don’t let us go into the cost implication of SON’s approval.
In all the cases of inspection and approval illustrated above one-man after inspection will just stare into your face to determine the amount to pay. That is why I refer to such payments as mandatory and not statutory. My mum of blessed memory used to remind me that in those days you go to tax office for tax assessments in tatters and public transportation or park far away from the building, because your appearance is what determines your tax.
For the purpose of this write up, let us assume that you submit your Form M to the bank in January, the processes and procedures to scale all the bottlenecks takes about 6 months, and all the approvals lapses after 12 months. In other words even before you commence shipment your approvals are due for renewal. It is not material to these government bureaus that you planned to ship one Container or ten.
It is common knowledge that this approach is a deliberate ploy to endanger certain categories of businesses in order to promote that of competitors in the same line of business. Why do I need to be a member of MAN to import CKD and add value to the economy? If the shipment eventually arrives the Country, you must pay “ground rent” to the local chapter of the OPC, to secure free passage. Your refusal to cooperate is at your peril.
Interestingly, the Hon Minister of Finance and the Hon Minster of Trade were poached from a civilized environment. The US government did not promote Apple products at the expense of Samsung. As a matter of fact, Apple has a couple of Anti trust laws they had to battle with. In the US Wal-Mart/Sam’s Club today exists side by side with Trader Joes, Target etc. Also the US government did not promote Ford cars at the expense of Kia, Toyota and Honda products.
The US government was instrumental to China opening up its economy, not because they are not aware that China with its huge population and sub products will pose a threat to the US market. However competition and free market brings out the ingenuity and enterprise in human beings. A business that is complacent is not challenged.
The trend nowadays is that once one “Oga at the top”, a big party man or major party financier signifies interest in a particular line of business in Nigeria, Government bureaucracy will ensure that every other person, already pursuing same line of business is run out or endangered. This should not, because the sky can accommodate every competitor in a free market.
When the two ministers talk about attracting “x” amount and number of foreign trade and investment into the Country, they conveniently forgot to add the “Y” amount and number that are being endangered. There is Policy inconsistencies, and summersaults, which are driven by the whims and caprices of individuals and not in the overall best interest of the nation.
Hon Minister for trade banned the import of Tokunbo cars, without adequate policies and procedures been put in place before making such an announcement. He is bringing in assembling plants from wherever to produce cars and sell them at affordable prices locally, conveniently forgetting that a car assembling plant is not what you buy off the shelve, the gestation period could take 5 to 10 years.
Even with the best intention, the Hon minister’s successor may not be so enthusiastic about his pet projects. Perhaps a car plant is not our priority at this period as a nation Why not fix, the electricity, the road, security, reduce corruption, and so on and so forth first. Mr. President in his opinion rated the performances of his mega ministers high, but some of us think otherwise.
Former president Obasanjo once invited Richard Branson to Nigerian and handed Nigeria sky to Virgin Airline, where is Virgin Nigeria today? Richard Branson swore he would not have anything to do with Nigeria again. El Rufai’s had good intentions in restoring the Abuja master plan, what has happened to the plans today? Where are the businesses your predecessors attracted? We will ask the same question after you complete your tour of duty. Where will be these businesses you had passion for that you had to endanger others especially the SME’s
The SME’s are the engine room of any economy. It is a very bad precedent to continue to hand over the economy of the nation to party men and financiers and reduce others actors in the same line of business to spectators. Some businesses just wish to occupy their little space without unnecessary harassment by government burecurazy. This is exactly the position as at today.
I am a member of a local Chamber of Commerce, in the USA. I applied for the membership on line and receive invite to functions just like every other member. I don’t have a plant and nobody has requested to inspect one. The membership dues don’t cost an arm and a leg.
When the right policies and procedures are put in place, businesses will attract itself, and not the reverse. You will stop gallivanting all over the place chasing shadows. We should be more concerned with making Nigeria a place we can be proud to continue to make our little contribution. This “man must know man” approach or Kangaroo business approach will not get us to speed, now or ever.
Thank You.
Sincerely,
Abimbola Okulaja
This piece is contributed from USA.
http://saharareporters.com/letter/endangered-businesses-abimbola-okulaja