Mention Africa and notions of political instability, civil unrest, and poor infrastructure typically come to mind.
However, that would be a mistake, and a missed opportunity, as the continent has seen significant economic advancements in recent times that make it a market that global investors cannot afford to overlook anymore.
Undoubtedly, Africa has a very large resource base. It has almost 8 per cent of world’s oil reserves, dwarfing the 2.5 per cent share of the Asia Pacific, including China. African oil production is almost nine million barrels a day, lead by Nigeria, Angola, Algeria, and Libya. Its gas reserves are 500 trillion cubic feet. Mineral ores are plentiful as well, especially gold, diamond, phosphate, manganese, and cobalt – all exceeding 20 per cent of global output.
Macroeconomic conditions have improved in several countries through market reform and better governance. Double-digit inflation rates have been brought down to the single digits and government debt has been reduced considerably. Over the past decade, Africa has posted a GDP growth rate exceeding 7 per cent, far ahead of the BRIC and OECD nations.
African governments have increasingly adopted policies to energise markets. They have privatised state-owned enterprises, increased the openness of trade, lowered corporate taxes, strengthened regulatory and legal systems, and provided critical physical and social infrastructure. Nigeria, in particular, has privatised more than 116 enterprises between 1999 and 2006 and entered into a number of regional and bilateral Free Trade Agreements.
Together, such structural changes has helped fuel a revolution in productivity by helping companies to achieve greater economies of scale, increase investment, and become more competitive.
Passage through Nigeria
In 2006, the Government of Nigeria decided to privatise a handful of state-owned manufacturing plants that were in mothballed condition. One such site was Eleme Petrochemicals (EPCL), which had a gas cracker and downstream polymer plants, the only such plant in West Africa. After a televised tendering process, Indorama was declared the winner, having outbid the next highest bidder by a significant margin. Subsequently, Indorama invested US$400 million to acquire and revive the plant.
Within 12 months, the plant was fully operational again and performance has been improving year on year. Since 2010, the plant has been operating at full available capacity. Today the company sells predominantly to the domestic market, reducing Nigeria’s import dependency by over US$400 million annually. It provides meaningful direct employment to over 800 Nigerians and many more indirectly. The Government of Nigeria has cited this privatisation as one of their most successful ever
Challenges along the way
On the road to success, however, there were a multitude of challenges and problems along the way. The initial revival of the plant, within a remarkable period of 12 months, is a testimony to excellent pre-acquisition preparation and then incredible work by Indorama’s team to hire and train a new workforce and simultaneously make a staggering list of technical improvements (including equipment overhaul and upgrades). It was also initially very difficult to attract qualified foreign specialists and expatriates to work in Nigeria.
There were very serious security problems, especially from 2007 to 2009. Security conditions in Port Harcourt, where EPCL is based, continue to be troubled and we have to persistently take many precautions for the safety of our staff. Over the years, Indorama has invested greatly in upgrading the security infrastructure in and around the plant.
Finally, it is an ongoing challenge to meet the aspirations of all stakeholders, such as the neighbouring communities and the unionised labour force. But positive strides have been made and continue to be made.
At an early stage, Indorama saw the opportunity to align the interest of important stakeholders by offering ownership in the company. Today, Indorama owns 65 per cent of EPCL, while the rest is divided between the Federal Government, Nigeria National Petroleum Corporation, River State Government, Host Community, and employees. All stakeholders benefit through dividend payouts, which we believe ensures that they protect the interests of the company. This public-private partnership structure in EPCL has been cited as a model example of inclusive growth in Africa.
The investment in EPCL was just the beginning of something special. After stabilising operations, Indorama started to invest in more manufacturing activities.
A polyester PET and preform plant was commissioned in 2012, the first of its kind in West Africa. In 2013, Indorama started the construction of a new fertiliser plant in Port Harcourt to produce 1.4 million tons of urea a year. At an investment of US$1.2 billion, it is the largest petrochemical foreign direct investment in Nigeria.
Nigeria has a large mass of arable land that is under-cultivated. Indorama’s fertiliser plant will give a great impetus to domestic agriculture, which is key to meeting the growing food demand for Nigeria’s large and growing population.
Indorama has plans for making even further investments, with the vision to be the largest petro-agro chemical company in Africa. Though investments have been limited to Nigeria so far, we expect to invest in other African countries too in the near future.
There is no doubt in my mind that Africa has taken a giant leap to integrate into the global economy. We are thankful to our employees, who continue to persevere despite of challenges, and to our other stakeholders, who help us through obstacles. It is our turn to share our profound experience with those who wish to endeavour in Africa, for the good of African commerce, which will enrich the common man in Africa through inclusive economic growth.
Indorama is pleased to be a part of the NTU-SBF Centre for African Studies together with other leading Singaporean companies, Nanyang Technological University, Singapore Business Federation, and the Government of Singapore. We are delighted to be present in Nigeria and by the pace of growth and number of opportunities there, which reflects greatly on Africa as well. As “South-South” partnership becomes increasingly important, we hope this centre will facilitate that bond even further. We are optimistic about the future of Africa, and Singapore can be an excellent bridge between Africa and Asia.