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The Economics of Cement Standardisation

11 Aug 2014

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  SON DG, Joseph Odumodu

The penchant for humanity to resist change is at the root cause of the reactions against cement standardisation, writes Tunde Lateef

There is nothing more difficult to take in hand and more perilous to conduct or more uncertain of success than to take the lead in the introduction of a new order of things – Niccolo Machiavelli (The Prince).

Only the young and young at heart embrace change without panting. Humanity resists with passion the best intentions and efforts to change the status quo. And this is the greater pain and danger of striving to preserve what is past its good use and undermining progress.

When the motor car came out a century ago, horse owners did everything to kill it. The same happened when the computer came out 35 years ago; printers in the UK staged protests, downing tools because they believed the new technology would steal their jobs.

Indeed, a decade ago, the Nigerian banking sector was in turmoil  as Professor Charles Soludo embarked on bank’ consolidation. Labour was deeply agitated about job losses and went all out to stop Soludo.

Surely, labour has yet to learn one basic law of economics; improved product quality always leads to greater demand and more job opportunities.

Without banking consolidation, a million Nigerians would still be queuing for hours daily in banking halls. What does it come to in just one year?Today, thousands of Nigerians do not enter banking halls to transact multi-billion businesses. Would Nigeria be part of the global banking if we did not move with the rest of the world? Nigerian banks now operate in over twenty African countries and further – thanks to consolidation and moving in the global spirit.

Nigeria Labour Congress Chairman, Comrade Abdulwahed Omar (Daily Mirror, August 1, 214) opposed the new cement regime that makes the 42.5 grade the minimum/all purpose grade and thereby forces the 32.5 out of the Nigerian market.
The comrade’s genuine concern is to defend Nigerian workers that opponents of the new standards claim would be affected if the policy is implemented. In fact, the opponents say one million jobs will be affected.

Earlier, the president, National Union of Chemical, Footwear, Rubber, Leather and Non-metallic Products Employees (NUCFRINMPE), Mr. Boniface Isok, claimed that 15, 600 jobs will be lost directly while nearly a million others will be swept indirectly if the 32.5 grade of cement is limited to plastering jobs.

No doubt, the two comrades mean well. However we must let good judgment and applied economics rule, not sentiments that can only becloud clear views. The manufacturers of the 32.5 grade who want its continued use point to buildings that were built with that grade and which stand till date. They forget the fact that there was the 22.5 and 12.5 grades which were phased out and which people can proudly point to structures that were erected with those grade of cement.

The Great Basilica at the Vatican City stands in perpetual wonder and proof of primordial building materials below our current grades. In that case, nations should return the era of bricks and mortar which have stood the test of time.

Cement is not exclusive Nigerian product. Nigeria does not have 0.1 percent share of the global market. China, the US and India control over 80 percent of world cement trade. Ironically, the three have phased out the 32.5 grade for the simple reason that the 42.5 is stronger and is produced at almost same production cost as the 32.5 grade.

It is simple economics that if two products can be produced almost at par cost, then the superior of the two should be preferred. Here is where labour should rise in support of Nigerian consumers against the manufacturers.

Two questions labour should ask cement manufacturers/importers are: one; why Nigerians pay almost the same price for two products/grades with different strength, and two why Nigerian workers are paid peanut while the manufacturers reap high profits.

The Nigerian cement industry posts the highest return on investment with $70 per tonne against $10 per tonne around the world. One would want to avoid calling names here but it is vital for us to note that LaFarge Group, which had dominated the Nigerian cement industry for 50 years has over 70 per cent of its shares owned by the French.

There is something called national interest, also economic diplomacy. Seventy per cent of LaFarge profits here are repatriated to France yearly. Nigerians know that Dangote Cement has been championing the 42.5 cement grade as minimum standard. Dangote cannot hold brief for government or the Standards Organisation of Nigeria but suffice it to say that in the realm of economic diplomacy and national interest it is for the Nigerian state to help Nigerian businesses to grow.

In this matter however, government is not helping Dangote against LaFarge willy-nilly. Available data show that both major producers produce the 32.5 and the 42.5 grades. It just happens that Dangote produces more than LaFarge and that is the crux of the matter – market share.

The world has been changing but many businesses failed to follow suit. That is the trouble some of the manufacturers now face. They rested on their oars, relishing their uncommon profits without thought of improving their technologies or products.

The point has often been made that no empirical evidence shows that the 32.5 cement grade is responsible for building collapses in Nigeria. The fact, however, remains that this nation has about the worst record of building collapses besides some South-east Asian nations.

It is voodoo economics for two products with different strengths to sell at same price. That alone is one reason those with lower grade would love the status quo to remain. In that case, the loser is the ordinary consumer. And labour would not support manufacturers against the consumers?
Labour must know that part of what SON has been pressing is for Nigerians to follow global standards.

SON wantsmanufacturersto specify grade, date of manufacture/expiry, use and warnings. These areglobal standardsfor products;even water, bread followset standards so that it is not exclusively for cement.It is simple logic that where there are grades, there must be limitations.Unfortunately, we have been hoodwinked to accepting that cement is cement.

Some manufacturers have deceived and still want to keep deceiving consumers saying that grades do not matter, that what matters is application. Now, they are saying it would take two years to convert 32.5 production lines to making the 42.5 grade. But the real blackmail is claiming that several thousands and up to a million jobs will be lost with the new cement policy.

As we noted at the beginning of this piece, change is not always welcomed by established businesses or oligarchies as some call them. Somehow, the ones who adopt change and ride the storm end up better.

The principles of world economics and politics have not changed and until they change, they continue to hold sway: Governments make the rules of engagement, and as long as the rules are objective and not lob-sided, they prevail. The economic interests of serious nations are not sacrificed over the interests of sections however powerful.

Economists hold, and correctly, that improved products quality always yields more jobs than existing ones, and that they also enjoy more patronage with the possibility of competing on global markets. But far above naira and dollar gains, the cost of human life transcends all monetary/economic estimates.

Labour is best placed to adopt the lesson of history: change is constant. Whoever wants to remain relevant must continually reinvent self and this apply to industry as well. Not to do so is ostrich mentality, mere wishful thinking that does more harm than good.

*Lateef, a development economist, wrote from Lagos.

Tags: Business, Nigeria, Featured, Odumodu, Cement Standardisation

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