part 1 :a case study of paint manufacture in nigeria eng. s.i.c. okoli – protective coatings...

Measuring local content in manufacturing:

A case study of paint manufacture in Nigeria

Dr. Michael Warner – Local Content Solutions

Eng. S.I.C. Okoli – Protective Coatings Manufacturers Nigeria (PCMN)

Part 2 : Measuring local content in manufacturingDr. Michael Warner – Local Content Solutions

Part 1 :A case study of paint manufacture in NigeriaEng. S.I.C. Okoli – Protective Coatings Manufacturers Nigeria (PCMN)

Measuring local content in manufacturing: A case study of paint manufacture in Nigeria


Overview

Part 1 – Case History of establishing paint manufacturing in NigeriaPaint manufacturing development in Nigeria

Local content requirements for paint manufacture

Using license technology

Capacity development in relation to market

Multiplier effects of supporting manufacturing

Part 2 – Selecting Nigerian content metrics for the paint industryWhat metrics to measure Nigerian content?

• General• Specific to paint manufacture

Conclusion


Overview of PCMN development

2000 2002 2004 2006 2008 2010 2012 2014

Distribution licenseFully imported product

100% foreign ownership

100% local manufacture100% Nigerian ownership

Manufacturing license signed

Semi finishing40% Nigerian ownership

PCMN becomes Plc60% Nigerian ownership


Overview of PCMN personnel development

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2015

0

50

100

150

200

250

NigerianEx-Pat

Manufacturing commences

Num

ber o

f sta

ff


Overview of PCMN capacity development

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

0

100000

200000

300000

400000

500000

600000

700000

800000

Imported productsNigerian Manufacture

New factory proposed 2015

Capital expansion Phase II increases capacity

Impo

rt / p

rodu

ctio

n le

vels

(li

tres

per a

nnum

)

• Global cost of corrosion > $2 Trillion per annum

• Likely cost to Nigerian economy = towards $10 billion dollars per annum*

• Nigerian investment to increase dramatically in next 10-20 years

- Offshore oil and gas / onshore processing / transmission pipelines

• Passing of PIB into law will release projects resulting in increased demand

• PCMN positioning its capacity plans to capture a large % of market

- Upstream / downstream and M&R activities

Importance of paint manufacturing


Local content levels in paint manufacturing


2012 2013 2014 20150

2

4

6

8

10

12

14

Local content requirmentTotal market

Mill

ion

litre

s pe

r ann

um

Nigerian heavy duty protective coatings

market estimate

PCMN Projected ca

pacity

License History


• License manufacturing agreement entered into 15th May 2009

• Covers manufacturing and use of registered trademarks

• International Paint is a major supplier of protective coatings globally

• Part of the AkzoNobel group with turnover > $ 18 billion

• Extensive oil and gas experience globally

• License agreement catered for

Establishing manufacturing plant in Lagos

Transfer of initial product range and associated technical support

Guidance on factory start-up and regular auditing

PCMN now accredited to ISO 9001: 2008

Advantages of license technology


LicensorAccess to market

Zero capital investment required

Reduced logistics

No in country footprint required

LicenseeAccess to world class products

Reduced product development costs

Quick establishment of product range

Support from technology provider

EconomyIncreased employment opportunities

Support for infrastructure projects whilst benefitting economy

Access to current technology

Encourages capital investment

Capacity Development - Challenges


• Difficulty in forward forecasting

• Associated Impact of stock on working capital

• Capacity building needs to be proactive

• Role of operators

Forecasting assistance

Identifying associated bolt-on opportunities

Capacity development (continued)


2000 2002 2004 2006 2008 2010 2012 2014

Capacity development (examples)


• Addition of 2 off 2400 litres high speed dispersers (previous slide)

• Addition of 6 off 2000 litre “pans” for mixing

• Further capacity expansion planned for (5,000 litre pans)

• Installation of semi automatic piston type filling line

• Associated infrastructure (generators etc)


Overview of PCMN personnel development

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2015

0

50

100

150

200

250

NigerianEx-Pat

Manufacturing commences

Num

ber o

f sta

ff

Manufacturing multiplier


• The Local content Law gives clear economic benefit to Nigeria

• Manufacturing offers significant benefit to national (Macro) AND local (Micro) economy

• Increased personnel required to operate manufacturing versus distribution

• Nigerian ownership is critical to the further development of the economy and the multiplier effect coming into place – for every 1 job directly created 10 additional downstream jobs are created

• PCMN is proud to be at the forefront of Nigerian content development in paint and coatings manufacture

• We look forward to partnering with NNPC and the oil majors to grow the Nigerian Economy into the powerhouse it should be in Africa.

In summary


• Capacity is available

• Proven in-country capacity should be supported

• Economic means

• Enforcement

• Expanding markets to utilise Nigerian manufacture

• Regionally

• Multinational projects

• Expanding portfolio

• Linking proven manufacturers to customers

• Expanding visibility

• Infrastructure project requirements

• Earlier involvement

Part 2 : Measuring local content in manufacturingDr. Michael Warner – Local Content Solutions

Part 1 :A case study of paint manufacture in NigeriaEng. S.I.C. Okoli – Protective Coatings Manufacturers Nigeria (PCMN)


Background to metric selection

Measuring local content in manufacturing: Selecting Nigerian content metrics for the paint industry

• Increasing clarity on metrics and reporting for operators

• Lack of visibility on requirements – downstream supply chain

• Metrics should

I. Provide details on Nigerian content

II. Measure of ability to serve the market

• Goods or services

• Currently limited to single point activities i.e. supplier assessments

• Metrics may need to be adjusted to reflect the organisations business

• Supply chain needs to be proactive

• Work in progress

Key areas of measurement


Investment / ownershipTrainingEmploymentImportationManufacturing and services

• Measures identified to

I. Indicate Nigerian content

II. Identify the suitability of the business to serve the market

• Currently being finalised prior to initiating monitoring

Accuracy of measures


• Care should be taken when selecting national content measures

• Metrics may be divided into 3 main types

I. Erroneous – [Insert definition]

II. Proxy – [Insert definition]

III. Accurate – [Insert definition]

• Some erroneous metrics may provide useful background information into supply chain

• Should be clearly identified

• How to measure relationship between licensee and licensor?

Sample measures – manufacturing and services


Metric AccuracyVolume manufactured in Nigeria per annum since start-up as a % of total volume sales

Proxy

Manufacturing capacity of Lagos operation per annum since start-up Erroneous

Number of product SKU's manufactured in Nigeria by year as a % of total sold

Proxy

Cumulative number of formulations transferred from technology provider Proxy

$ value of raw material purchases awarded to nationally registered vendors (Inc. packaging) per year as a percentage of overall $ value

Accurate

Local content based upon $ value of raw material purchase less proportion of imported components of purchased goods e.g. CIF value

Accurate

Sample measures – manufacturing and services


Metric AccuracyLocal content based upon $ value of raw material purchase less proportion of imported components of purchased goods e.g. CIF value, Top 10 products

Accurate

Number of man hours of national labour spent on manufacturing Erroneous

$ value of service contracts awarded to nationally registered vendors per year as a percentage of overall sub-contracts

Accurate

% nationally registered vendors on company vendor register Proxy

Local content in manufactured paint


• Assessing using drill down method for national content in each paint material

• Can be used for domestically manufactured OR imported

• Can be utilised with local content calculator

• Limited visibility as it contains proprietary formulations belonging to licensor

Michael – Please can you insert this description I was thinking of the drill down slide from the training?

Conclusion


• Paint industry is an important part of supporting infrastructure development

• License technology with globally recognised technology provider offers significant benefits

• Offers potential for rapid start-up and capacity development

• More work needs to be done on visibility of metrics for supply chain

• Further guidance on national content metrics

-Government

- Operators

• Choice of metrics is important for correctly identifying national content

THANK YOU

part 1 :a case study of paint manufacture in nigeria eng. s.i.c. okoli – protective coatings...

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