interview By Chinedu Eze
The Group Managing Director of Red Star Express, Dr. Sola Obabori, in this interview says advises the federal government to focus on rebuilding the economy following the Covid-19 lockdown. In order to boost revenue from export, he advises the government to remove hindrances to export of perishable goods. Excerpts:
What is your take on the impact of the pandemic on the cargo sub-sector?
When the government said passenger transportation was halted, that we could do cargo, my first response was that the lifeblood of an economy is about people who are moving. There is a big role that movement of people has to do in terms of creating activities. So you have people, you have the goods and you have the services that must interplay permanently before you can have robust economic activity.
So it is the level of the interplay you have between people and goods and service that determine whether an economy is growing or slowing down. Which means that by virtue of the fact that the closure of the airports didn’t permit human beings to move any more, it tells you a lot of story that the diminution on the quantity of goods and services that could happen. So to answer you very straight forwardly, there was a big impact, and there is still a very big impact in terms of the amount of cargo that can come into the country. That is a very massive impact. The supply chains of most companies was disrupted because when you have lockdown of people in China who can’t go to work, that means they don’t go to their factories and they don’t produce. So when they don’t produce there is nothing for the aircraft company to bring to Nigeria. So it is the human beings that must be at work for all of these other elements to be able to function and produce value.
So in Nigeria they say cargo can move but people can’t travel from Lagos to Abuja. Who goes to Abuja to buy some of the things, who goes to Kano to bring things to Lagos to come and sell? So that interplay of people and goods and service will determine whether an economy is slowing down or is growing. We are heavily impacted by the activities of the lockdown. So even if the activities of the e-commerce side are there, that is dependent on some other factors. Production must take place in some of these factories, which must be run by human beings before you can now have movement of goods and service from place to place.
But as people were not moving during the lockdown, they were ordering goods and other services online, which boosted online marketing and distribution of goods, especially consumables to home. How do you assess that?
The courier service is a response to the essential part of what people will need to survive when they are in lockdown. For example if you were ordering things online, what were they ordering? To a large extent they were ordering food and those types of things. I am not sure anybody was ordering for shoes or ordering for bags, suits during lockdown. So if you check the economy of Nigeria you will see reflection of that. What is the relationship between what we consume on a daily basis, which you now call essentials, and the things that are luxury or that are just semi luxury? Because the woman who sells clothes now, what has happened to her in the last three months? She hasn’t made a sale. Look at the hotels that are just around the corner, they have been in lockdown since March 31st; they haven’t made a dime in terms of income. I drove in front Sheraton the other time and I saw that for the first time, I have been going to Sheraton since 1987, this is 2020, that is almost 30 years, so for the first time in my life time I saw that Sheraton Hotel was locked.
So what will the motorcycle that is delivering do for such businesses? So if 90 per cent of your economy is not working and only the agro or food related part of the economy is working, it shows you the amount of revenue that is also lost, that the courier companies are struggling to share among themselves. And these other fellows you mentioned now are new entrant into the business who are trying to fight with us to partake in the little cake that is left for us to share.
Let’s look at the logistics industry, what do you think the government should do and what should be the new drive in terms of government policies?
You know I have argued this on many other occasions trying to ask government to do what they can call creating stimulus for the industry. I have argued that on some other platforms, saying that the government needed to support our industry to ensure that we can have some kind of stimulus to help the sector. Don’t forget that government is supporting the pharmaceutical industry; even the medical diagnostics now can go to CBN and have access to some kind of loan to help their industry. By the time the aviation people will be coming back with their aircraft most likely they will get some palliatives as well or some stimulus package that will help them to come back otherwise many of them will have to go away. Because if you check across Europe and America you find that government is beginning to give them money, Lufthansa for example government has given them money and they are buying about 30 per cent of that company. That is what will happen globally; in fact, IATA (the International Air Transport Association) is also pushing and trying to ensure that governments across the world can help the aviation industry to come back.
For our own industry, believe me honestly, I am very reluctant to ask for stimulus at this time from the government of Nigeria. Reason? You will kill the government. So if agriculture people who are working on the farm are asking for stimulus to enable them plant whatever they want to plant, to enable them get resources such as fertilizer, equipment to enable them work during this raining season or during this planting season, the airlines are going to ask, and yet we know that the government revenue has gone down.
Revenue from oil has disappeared as you can see; it has gone really terrible in the last one month or two, when even a barrel of oil in the global market went down to zero dollar. We have never seen it like that before. So the government doesn’t have money from oil substantially right now, all their income from customs duties has leaned because goods are not coming into the ports as they used to come. That means their income will also go down. The money from aviation, which is the passenger charges and all of those things that you have on your ticket, those things are not coming right now. And companies that are supposed to manufacture and pay tax to government they are also not getting those incomes. Should I add more trouble to the government? I think I am not going to do that, so everybody should go back and do his or her job and try and make the little impact that we can make around this time. I read one article with one caption that was said to have been written by Jack Ma that says, “This is not a year to make profit, this is a year to stay alive”. He says, if you stay alive this year, you have already made profit. There is a lot of depth in that statement. This year is not a year to make profit, but companies are still struggling to make profits; we want the profits because I can’t tell my shareholders that we are not going to pay them money.
We want to pay them but the reality that we are dealing with right now is that we have to stay alive and survive so that next year we will be back again to make profit and life can go on. So I am not asking for anything from government, what I can ask from the government is that things that makes our lives easier, what we call enabling environment for businesses, which is what they must put in place now. If there are waivers that the government can give in terms of time for us to pay our taxes, if there are things that they can do to make life easier for those who pay, pay as to earn taxes, those are the types of things the government should look at, at this time. In other countries they are doing that, I am sure you know that in some countries of the world they are even telling banks to reduce the taxes or interest paid on loans around now. There are some parts of Africa that are saying that you don’t have to pay rents, even on power, we are asking for them to do some rebate on power so that the pricing favours all of us right now.
Do courier companies have strong association?
Absolutely we have, there are two major ones: Nigerian International Air Courier Association (NIACA), that is where we belong, and there is also Association of Nigerian Courier Operators (ANCO). So the first one constitutes most of the big organisations like Red Star, UPS and DHL. We are in that first category and a few other companies that have chosen to associate with us. ANCO is also very big, most of the indigenous companies that you we have are also in that category. And the two of them are really strong and we keep having meetings and engagements to talk about the industry from time to time.
Would you say the major hindrance to export of perishables from Nigeria is government policies and government agencies, how can we eliminate those hindrances so that Nigeria can export more perishable goods?
Part of the biggest issues we have had to enable countries like Nigeria export to other parts of the world, some of them have to do with the issues of what happens at the airports and what happens at the sea ports. You remember there was a time Nigeria was trying to send some containers of yams abroad, and they became rotten by the time they were arriving at the other side. The Minister was involved in that export and they were at the sea port to do some kind of ceremony around the export of yam from Nigeria and by the time the yams were getting to the destination they were all rotten. What does that tell you – bureaucracy of how this thing will go from here to there?
So if you are going to send something from Lagos airport, for example, you have more than six or seven government agencies asking questions about the same item. The Customs is a law enforcement agency arm of government, whatever the police can do at the airport, Customs can do it, if they catch anything in your item that is not to be exported, and they can arrest and hand you over to police later. But at this airport you have more than seven agencies of government that are doing the same different things at different times asking question on the same thing.
So you will have anti-bomb agency, quarantine, customs, police, National Drug Law Enforcement Agency (NDLEA), and you have all those agencies there.
So if you go to another country like Ghana, she is doing what Nigeria has been trying to do which is called one window outlet for export. That is what they should do. In my opinion, once you have Customs at the airport to enable government get its revenue that is due to them and you have the quarantine services there to ensure quality, which is all you need, export can be done. But for as long as you have this layer upon layer of checks and all kinds of things happening there, you will kill the trade. And beyond that; even the cost of exporting from Nigeria is not comparable with what you have cross West Africa. Go to Ghana, how much does it cost you ship things out? What kind of waiver is the government putting in place to ensure that there is a special treatment for agricultural produce?
Because if you are producing yam in Benue State where you have the largest area for production of yam, across the world, I am told that Benue State probably has the largest amount of yam in the whole world. But how much of that are we able to export? If you go to London, I travel a bit and I see on the streets of London, in some of the shops, you will see all those African shops and Nigerian shops there, you will see Ghana yam (which is actually Nigerian yam) on the shelve, you will see Ghana palm oil, and they will put produce of Ghana, how do those things get there, that we can’t send them from here?
Sometimes people argue that those things go Ghana before they are exported. I don’t know how much that is true because with the difficulty you have from the border point to get there, I don’t know how easy it is. But what government can do is to ensure that all of these agencies of government ought to vacate that place and reduce the process of exporting agric products. Also charges on those perishable goods will have to be substantially reduced.
Kenya exports flowers and all kinds of things from Kenya into the European market; they make a lot of money from agriculture. But in terms of production capacity we have it more than them, so it is to straighten those policy issues that maybe hindrances to export and once you can tackle that our lives can be made easier. I am aware that there are many efforts going on right now. We belong to all kinds of associations that are also doing advocacy with the federal government to ensure that we can export.
We have members of our team working with the government to suggest recommendations as to what we need to do at this airport. I am sure that in another short time from now, maybe hopefully in another one or two months, a paper will be made public to the Nigerian government. Because we will not keep quiet until these things are resolved. There was a time we were working on a project in Red Star which was to help Nigeria export much more than we have ever done, so we were trying to work from Ibadan, we got some space at Ibadan where we can aggregate things from the whole of the South West of Nigeria into Ibadan. From Ibadan airport there will be flown into Lagos or truck it into Lagos, from here it goes to the UK. We got a space in Akure such that the whole of Benin area and Ekiti state area and Ondo can converge in Akure and then we can fly them or truck them into Lagos and then it can move from here to those European markets. We were doing something in Bauchi, we got something in Jos, all of these things were targeted at helping various products that are coming from those agricultural areas, so that we can aggregate them and be able to fly them out of Nigeria. But we have met all manner of difficulties in trying to get that done. And we are not the first to try, there are all kinds companies also trying to do different things that we have done. Many of them are also trying to rework their plans.
What are the new investment and activities for Red Star Express?
One of the best things we did in the last financial year end 31st of March 2020 for the 2019/2020 financial year. One of the best decisions we took last year was the capital raising that we did. We did a rights issue which was to help us to raise additional capital to augment our working capital. If we didn’t do that last year, look at Covid-19 year, it would have been impossible to do it. So we are very grateful that we took that decision and we followed through and we raised 102 per cent of what we intended to raise.
It was extremely successful as a rights issue. Now that people are struggling with Covid-19, companies are not able to operate, some need to retool, the rains have come, all our trucks are inside the rains as they drive all over the place, motorcycles are going to get bad. For those of us who are in this business we know the cycle, the moment the rains starts, you have to pay attention to your assets; order wise, they get rotten and by the next cycle of rain those assets are no longer good enough. So, for us our capital raise was successful, now we are acquiring new assets. Large fleet of trucks is being bought and primarily they are supposed to help us respond to the opportunities that will come post Covid-19.
We have spoken a lot about agriculture just now, we are trying to do co-chain trucks that will move things from the farm for people, move them to the shop floor for retail stores that are all over the country. So, even if you run a poultry shop, for example and you are producing your poultry products, we will support your company by bringing co-chain trucks there to help you move these items from wherever they are produced to the shop floor where they can be sold on a retail basis.
The Pharmaceutical industry as well who are also beneficiaries of what is happening now, the pharmacist are doing good now because even people at home are taking care of themselves, they don’t want to go to the hospital because they don’t know what will happen. The doctors are very careful now; they don’t want to treat people because you may be coming with Covid-19 as that you don’t infect them. So people do a lot of self-medication now. So the pharmacist shops are selling well now, so there is a lot of movement of pharmaceutical products across the country. Red Star is well positioned now to support all of those people because assets are available, large amount of windows are bought to support the e-commerce industry. All the e-commerce people that you mentioned a few minutes ago, we happen to be the backbone for some of them, supplying them with motorcycles in 100s to ensure that they can move their product from one place to another. So as far as positioning the company for future is concerned, I think we have done quite a bit, and that is a continuous improvement area for us.