We chose Nepal because of its market

We chose Nepal because of its market

25 June 2015 | The Kathmandu Post

Interview Devakumar VG Edwin

JUN 24 - Devakumar VG Edwin is the executive director of Nigeria-based Dangote Group, one of the largest global business conglomerates. The African group is on the verge of constructing a cement plant in Nepal with an investment of around Rs55 billion. Edwin was in Nepal recently to observe the progress and help the country following the April 25 earthquake. Sanjeev Giri of The Kathmandu Post caught up with Edwin to talk about how the construction of the cement factory was progressing and future prospects. Excerpts:

What is the purpose of your visit?

When we came across this tragedy, we decided to contribute. We came to show our support to the people of Nepal. We have contributed $1 million to the government of Nepal. We met with Prime Minister Sushil Koirala and gave him a cheque for the Prime Minister’s Disaster Relief Fund. In addition, we are also here to discuss the cement plant we are setting up in Nepal.

Our purpose was both to support Nepal as well as discuss the future roadmap of the company in setting up a factory in the country. On the sidelines, we also met with Finance Minister Ram Sharan Mahat, Industry Minister Mahesh Basnet and officials of Investment Board Nepal (IBN) and discussed a variety of issues.

IBN has already approved the Dangote Group’s foreign direct investment to establish a cement plant. What concrete development has been achieved in this regard?

We are waiting for two additional mining exploration licences. One is for a small area and the other one is for a bigger area. Once we have those licences, we can move very fast. Normally, the construction of a cement factory takes 27 months. And I am setting aside three months for procuring these licences and also doing some testing. So, 30 months from now, I hope to go into production and bring cement to market.

Have you finalized the place to set up the factory?

We are looking at Makwanpur. Almost finalized. And that’s the primary area for us.

Nepal is the first international destination for the Dangote Group outside Africa for manufacturing cement. What is the main reason behind this?

We are into various businesses. We are into food, agriculture, fertilizer, petroleum refining and petrochemicals. The only business we have started outside Nigeria is cement. And cement, if you look at its nature, is a cheaper product. The biggest cost element in cement is transportation. So, it is ideal to locate the plant close to the market. Though we have plants with huge capacities in Nigeria, we have gone to various small countries with small populations and established small plants. When we came to South Asia, we were looking at Indonesia, Myanmar and Nepal. One of the reasons we chose Nepal is the immediate availability of a market and future potential for expansion out of Nepal. So, it is not just immediate business for us. We are looking forward to future expansion and potential for export.

Does this mean that Dangote is looking forward to exporting its products to South Asian countries?

Definitely. Our focus is always to satisfy the local market before going beyond. The country is starved for cement and your products are being exported probably for more profits. This isn’t good for any country. So, our primary focus will always be satisfying the local market and exporting the surplus production. But we will be installing a massive additional capacity which will be exclusively for export.

How do you assess the Nepal market? How do you see the future prospects?

We own cement plants of various capacities, but Nepal’s terrain is a big challenge as the mines are deep down. If the mine is deep down, extracting and taking the cement down will be difficult. The investment in roads will be high. So we are trying to locate the plant at an elevated level closer to the main road which will be shorter. We can’t go for very big plants. So we are initially planning for 1.5 million tonnes

which is still, I believe, the largest plant in Nepal.

What will be the group’s focus?   

Our focus has always been the use of the latest technology, which helps you to ensure energy efficiency so that production costs remain low. Number two is quality assurance. In all our cement plants, the quality assurance department is monitored by robots, so you can do a number of tests throughout without any chance of mistakes. And the technology obviously helps. No plant in the world can claim that it has technology that is superior to ours. Number three is environment friendliness. Our plants are the most environment-friendly. We don’t go by environmental standards set by the country. We go far lower than the European standards which are the most stringent today. We also take care of social obligations and step out for community development. The investment we make in environment friendliness and community engagement makes us locally accepted, which is a challenge for many similar companies.

So when we come to the market, we become able to start selling cement at relatively lower prices which helps us in price competition. And the quality also helps us to compete. When we started selling cement in Senegal, it already had two cement plants. Both of them were exporting more than 50 percent of their output because the local production was far beyond the local capacity. People called us mad when we started setting up a cement factory there. During the first month, we struggled. In three months, we were functioning at 100 percent capacity and we have not been exporting our products. We are selling 100 percent of the production in the local market. This is because when people used our cement, they found it to be of a superior quality compared to our competitors’. So, if your product has quality, it will sell. And if better quality comes at a lower price, people will opt for the best one.

Apart from cement, is there any other segment you aim to introduce in Nepal?

Yes, probably in the long term. We are engaged in many segments. However, we have gone outside Africa only in cement. And this is our immediate focus. But may be in the long run, we may want to come in other segments too. Much will also depend on how things move in Nepal with time.