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Abuja transport agreements: El-Rufai, you are wrong there!
TOOCHI UCHENDU Lagos, Nigeria
Monday, January 17, 2005
I have always wondered the type of analysis our public policies are subjected to in other to fully assess the expected impact of public expenditure and all forms of concession, which are by their nature, indirect allocation of public wealth.
The current efforts by various level of government to install a befitting transport system in most of our cities readily come to mind, the recent announcement by the Minister of the Federal Capital Territory (FCT) being a reference point.
I am not aware of any call to the business community for the Expression of Interest in the public transport system of the Federal Capital Territory neither am I aware of any public hearing to review and update the transport plan of the FCT in line with the realities of today i.e. projected population growth and the feasibility of the various modes of transport. Sadly as it is, we have failed to realise that when public servants arrogate to themselves the all knowing status in solving society’s problems, very grave mistakes are made at colossal public cost. The recent appointment of National Unity Transport and one other company to take charge of FCT city transport scheme falls short on due process and transparency - two tenets which I believe Mallam El-Rufai holds dearly.
We, as a nation indirectly encourage investment in power at all cost when we deny existing businesses opportunities for growth and handout concessions to a few individuals creating overnight mega companies with little or no work. How do we then encourage enterprise, industry and hard work? The National Unity Transport Limited has no visible bus fleet today but will be operating 1000 buses in the next four years. Haba, Minister! Transparency should be a constant not a variable.
The first surprise from the FCT came with the London Cab deal and the presentation of a prototype to the President. I do not know the rationale for choosing a vehicle which has not been in this market since our independence, for the onerous task of moving people around in the Abuja hot weather but I know that operationally the project is as laughable and neo-colonial as it is dead on arrival. My reasons being that so many operational issues were entirely ignored and I will just mention a few.
Introducing a new vehicle into a market comes at colossal cost (ask Coscharis about BMW and Rover) because selling the vehicles is the easiest part but keeping them on the road is surely a lot of work. The thin margins on transport business does not give the transporters the luxury of stocking spare parts and for a newly introduced vehicle the traders will not bother to stockpile because it will be slow moving for them. We obviously know that a traders profit comes from either high turnover or high margin. So the Cab operator must buy from the market at high margin or stock the spare at high holding cost. Also the issue of being able to swap parts is a critical success factor because it expands the availability of spare parts, for Japanese vehicles most of the regular service parts can easily be swapped i.e. Toyota and Honda and I wonder which vehicle will be using the same parts as the British Cabbie. Local maintenance expertise for the vehicle is also critical especially since it will be used for commercial purpose this will ensure quick fix and reduce down time. Downtime is the killer for any transport operation and it is caused by lack of spare parts either due to non-availability or prohibitive cost. Having highlighted the above I wish the Abuja Cabbie good luck because I think they will need a lot of luck.
The process of choosing National Unity Transport Limited a relatively unknown player in the Nigerian transport industry, backed by the Brazilian bus builder, Comil with its shortcomings provides another loophole for capital flight. It is expected that any discerning policy maker should know that any transport policy or initiative without local content cannot achieve any reasonable immediate, medium and long term benefit to this economy. But immediate media attention and grand standing has become more attractive to our public office holders than actually solving society’s problem which is the basic essence of governance. Local content is not briefcase carrying agents of the bureaucracy who go about hawking deals to foreign companies whose only interest is limited to haemorrhaging this nation and impoverishing the majority of the populace.
In a country where we have about four comatose bus building plants Leyland at Ibadan, ANAMMCO in Enugu, Volkswagen in Lagos etc, Government is giving out concession for 1000 buses without any condition of developing the local bus building capacity. The negative effects on the economy are as legion as they are lethal but I only highlight a few.
Local assembly Versus Wholly Built Buses The freight of a wholly built City bus shipped from Brazil represents about 20% of the actual cost of the bus. About half of the freight can be saved by assembling the buses locally. This will also save our much needed foreign exchange and create jobs for our people at the assembly plant. In addition some Nigerian companies would have manufactured various components thereby increasing the multiplier effect on the economy. With the Comil transaction our jobs are being exported to Brazil.
The cost of delivery of those buses should also be of concern to the Minister because the key costs in transportation are the cost of acquisition, maintenance and fuelling cost which will determine the price of the service to the masses. The Minister may not know that in additional to the high freight of bringing fully built buses that the Bus body represent about 60% of the entire cost of the buses and by building it locally we would have added at least 30% content. In addition to that we would have developed indigenous expertise for refurbishment of the buses and maintenance which is critical for optimum capacity utilisation.
The Specification and Quality of Wholly Built Imported Buses The specification of most highway going buses in Nigeria today does not meet safety standards for such category of buses. This has safety implications when the vehicles are involved in accidents. I am not sure the Minister is aware of this. The choices of the material for the body of the buses have economic, environmental and even safety implications. The Minister should ask the following questions: How many Comil built buses are in Nigeria today? How many successful transporters are using Comil built buses today? The answer will be very informative because our public sector deals have become the back door through which substandard products are introduced into the country. I had earlier highlighted the challenges of introducing new brands of automobile especially for commercial use where the maintenance is expected to be high because the vehicle will be on the road for long hours.
It is not enough for Comil to bring in over-priced buses at about N10m each that will disappear in 5 years like the Nissan FUMTA buses. The other day the assets of FUMTA were sold off for obvious reasons which are not the topic of this article. City buses bodies are built to last at least 15 – 20 years in developed countries with periodic refurbishment and replacement of the engines, axle and gear systems.
Loss of opportunity to attract investment This is clearly another loss of opportunity to attract foreign investment. Most of the Federal government shares in the moribund bus assembly plants have been listed for sale. When concessions are given with conditions on the sourcing of vehicles locally, huge orders like this will be available for the local bus plants hence will make it attractive for would be foreign investor. Why is Comil not taken over one of the Bus assembly plants? A 1000 bus order with potential of 20,000 in the next ten years can sustain any bus assembly plant in the world.
The Ghanaian government compelled DAF (Dutch Company) to build the body of its buses at existing Neoplan plant (American Company) in the deal for the supply of City buses for its private mass transit scheme. This was achieved even when the transaction was being funded by the Dutch export bank. National interest is a critical ingredient of public policy and must be entrenched in every decision model if we will ever achieve development in this capitalist world.
New Initiatives on Environmental friendly Automobiles Globally there has been increased awareness on the need for environmentally friendly Alternative Fuel Vehicles (AFV) and these efforts are aimed at ensuring cleaner air quality in our cities and reduction in greenhouse gas emission. It is also meant to conserve scarce energy (petroleum) with the attendant economic benefits. The public/private mass transit system provides the best opportunity for the introduction of the AFV for energy security and cleaner air. In the last ten (10) years the city transport system in the developed world and even third world countries like Egypt and Bangladesh are already using Liquefied Natural Gas (LNG) and Compressed Natural Gas (CNG) buses. One would have expected our Digital minister to initiate such novel projects with the new concessions or do we have to wait till the environmental pollution gets to the level of Lagos before we protect our highly priced capital city?
Loss of means of Livelihood for Current Operators The honourable Minister was quick to announce that the new buses services will be creating 950 jobs per annum but failed to tell us the fate of the Nigerians who are currently ensuring that people move around the capital city. How are the current operators incorporated in the new scheme? He should not forget that they kept the city moving till date and will keep it moving till the new buses arrive. There must be an opportunity for them to participate in the new scheme. If not the FCT Minister should be ready for a show down. I suggest they should consult Lagos State Government on this issue.
Need for a Regulator The last point further highlights the need for a regulator before a process like this is commenced. The honourable Minister did confirm that a regulatory agency will be put in place and I wonder what they will be doing after the concessions have been given out and our people carelessly displaced from their means of livelihood. The regulatory agency should have been put in place to articulate all the issues and set the parameters for the whole process from licensing, bus specifications, routes, operation, incorporation of existing operators and service standard monitoring. The Nigerian Communication Commission (NCC) GSM auction is a widely acknowledged reference point on transparency, due process and role of a dignified regulator.
Way Forward The highlighted losses is not by any means exhaustive however it goes to show the hydra headed possible effects of public policy which need to be envisaged and properly articulated for in-depth analysis of government policies and action in the best interest of the public. For these reasons the government must encourage open forum and public hearings, that way they can get free consultancy since it is obvious that there is a clear knowledge gap in our bureaucracy. It will also limit the engagement of consultants which has become another drain.
Government direct involvement in economic activities and concessions must also look beyond the provision of the service and always take into account our National Interest. The issues of capital retention and job creation with the obvious effects on a favourable balance of payment and stronger currency cannot be overemphasised. The capital flight in the transport industry is enormous from airline to shipping and then land transport; it should call for unified action across all levels of government to see that the adverse trend is curtailed. If we cannot add value to our export due to our weak manufacturing base we should consider the alternative of insisting on adding value to our consumption since we have a better bargaining power with that.
There is need to harmonise these bus orders so that we can have a better negotiating power in terms of pricing, local job creation and technology transfer. It could involve the adoption of certain locally manufactured the bus models for any government direct purchase or private sector concession and I strongly feel that the Federal Ministry of Transport should pay some attention to road transport. We are over due for a Federal Road Transport Agency like we have for Maritime and the Airline Industry. I am yet to see the US government buying any vehicle that is not American. The London Cabbies Mallam El -Rufai bought are British symbols just like the limousines are to the United States of America; where is our Nigeria symbol? In the UK or US cities the transit vehicles are almost uniform in each country and we should start thinking along that line because of the obvious benefits. The Federal Government should be able to convince the thirty-six state governors and FCT Minister especially at this time that the palliative for the transport industry to cushion the fuel price increase is about to be disbursed.
The Alhaji Shehu Shagari NPN-government patronised Peugeot Automobile Nigeria (PAN) as well as the various state governors and they all looked gracious in the black Peugeot 504 and white leather seats. The armoured Hummers and all kinds of SUVs that we see today in government fleet are most unpatriotic. The common reason adduced for the choice of SUVs is the state of our roads and safety and I wonder whose responsibility it is to provide the two. The local assembly plants must be supported through the tough times so that we won’t need to be rushing to Brazil to buy sub-standard buses when Mercedes assembly at Enugu commenced operation almost at the same time with the Mercedes plant in Brazil. Today the buses are almost fully built from engine to body in Brazil while we have even almost discontinued the assembly at ANAMMCO, Enugu. Governments all over the world provide some kind of subsidy and support for its key industries no matter what the agreements are at World Trade Organisation (WTO). The Organisation for Economic Cooperation and Development (OECD) consisting of the most developed countries of the world are still giving direct subsidies and support to heir local farmers despite the Uruguay agreement and at the detriment of Africa’s commodity exports. To abandon a key industry like automotive industry to the market forces given our population is inept. We don’t just hurt our economy today but we kill the dreams and aspirations of our next generation because a young graduate Engineer who wants to be an auto-builder may never have the opportunity in Nigeria because all our assembly plants are moribund.
Past administrations also share the blame for not monitoring closely the investments in the auto assembly plants to ensure that the set goals at conception were achieved. It may interest you to know that since the set up of ANAMMCO, not one Nigeria engineer has been on the executive management of the company. The nearest a Nigerian can get on the executive management is a support function in sales and finance which explains why even though they are basically trading on fully imported vehicle today, a German is still there as Managing Director/Chief Executive.
My view is that the companies should not be allowed to die, the Federal Government in deciding to sell its shares should also consider the option of buying back the plants from the technical partners and sourcing for new partners who may identify more with the needs and aspiration of our people as have been enumerated above. The Indians could not afford Mercedes Benz and they built TATA to take care of the huge population which needed to be moved. All cards must be on the table in determining what is best for our country, one wonders why the Germans are still hanging around at ANAMMCO when the company has been almost written off. That calls for caution in the privatisation.
We must redefine the minimum parameters and standards which our public policy must pass through before decision making in order to ensure that the right decisions will be the norm and not the exception. The FCT Minister’s agreement with National Unity Transport Limited calls for mourning, not applause, and I believe that it is not too late for El-Rufai to retrace his steps on these transport initiatives.
May God Bless Nigeria!
Mr. Toochi Uchendu is a chartered accountant and lives in Lagos
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