Obabori: Companies Need to Rejuvenate to Survive the Recession

0

The new Managing Director, Red Star Express, Mr. Olusola Obabori, in this interview with Raheem Akingbolu, spoke about the strength of his company and expressed confidence its management team to withstand the economic downturn in the country

You were recently named managing director of Red Star Express Limited, what are your plans to take the brand to the next level?

It is a mixed basket of joy because it comes with serious responsibilities. One can be joyful of clinching a bigger position, but it is important that the occupier is conscious of delivering on the expectations. There are big tasks ahead as I have already put the euphoria of been appointed the GMD behind and have settled to do the work before me. In terms of plans for the future: I have met a very good company on ground that has done very well in the environment. Red Star has gone through many phases and it is a listed company on the Nigerian Stock Exchange (NSE) which puts us in the public domain. Therefore, we must not let down those who have put their investments here. That is why my number one role is to secure what is on ground and build on the foundations that have been laid in the last twenty-four years. So, we are looking at business expansions in various areas. We are looking at various innovations and technologies to drive our businesses and we are doing serious investments in the company for future stability. One of the things we have found in companies like this is that for your future growth we must consider the strategic investment areas. That is the way we are building a future for those that will later take over.

What are the company’s plans for indigenous business acquisitions?

As a businessman you keep your ears and eyes wide open to opportunities. So, Red Star Express will respond with regards to opportunities. At the global level it is happening in our industry; companies have to ‘swallow’ other companies. Such acquisitions have happened a lot in the banking sector in the last ten to fifteen years. Some of them are done voluntarily, while others are through enforcement or policy direction. When government says you must have certain level of capitalisation, people may have to respond by ‘swallowing’ smaller companies. In our industry it is usually voluntary. We are open to business opportunities and will keep monitoring situations in the industry.

Considering the current economic situation and the competition in the industry, do you think Red Star would be able to maintain its position?

To address the current situation, I may need to dwell a little on where we are coming from. Red Star was founded in 1992; a very turbulent economic period also in Nigeria. In 1998, there was global economic meltdown but we weathered the storm and came out stronger. This is eight years after that cycle that saw the collapse of many banks. Therefore, permanent rejuvenation and focus are core areas that companies must emphasis. Because if you dabble into various businesses to stay alive; even diversification can kill your business. I have studied many companies and when you are a master of one trade, you also get yourself into trouble. For us in Red Star, one of the keys that have taken us thus far is focus. Red Star is a much focused company I met and I have inherited as the CEO to run the affairs. Since 2008 we have had a bit of compartmentalisation of our business leading to- Red Star Fright (RSF); Red Star Express (RSE); Red Star Support Services (RSSS) and Red Star Logistics (RSL). So, we have four companies within Red Star Group.

You just spoke about being focus, why then did the company ‘unbundled’?

The purpose of the compartmentalisation is to ensure that the entities can focus on the area of growth that we consider core for the business segment. For example, freight is a mega area of expansion. Sea freight market is huge, even though in Nigeria we are going through economic recession. In other words, the volumes of goods have gone down substantially. The Customs Service even confirmed that the volume of exports has depreciated by a very wide margin. Also from the airport side, as an import dependent economy, the volume has reduced, which means for us to go up we have to deepen what is on ground. For instance, the RSSS is engaged in outsourcing services for the banking sector. I see companies outsourcing some of their services to enable them focus on core competencies. We have offices nationwide; so, there is a structure already in place to help companies manage services they can’t handle, and definitely, it is cheaper for them. If you run a chemist company, must you run a dispatch session to be able to distribute your goods from company-to-company and homes? It makes a lot of economic sense for you to ‘offload’ that aspect of the business, because by the time you start buying trucks and other machinery, recruit staff, of course you are going to pull yourself down. We have seen that happen to many companies who ended up burning their fingers. So, looking at these opportunities we created those divisions in our business to address the needs in our current economy. And we are responding well to the challenges. In fact, if you want to do well in Nigeria look at the banks; they are deploying technology to equip their businesses and drive down costs. If you do same with your business the results will show you made the right decision.

Can you please assess the postal industry in the country?

The industry is a reflection of total state of the economy. If the economy does very well, it will also benefit from it. If the power sector runs very well, what will happen? Production will improve substantially. To us, there will be more goods to deliver from one location to another. The industry is not operating in isolation of the rest of the economy; we are part of it. We oil the machine of distribution from the point of production to the level of consumption. That is our job; intermediaries from the time the raw materials are sourced to the end production. As the middlemen, whatever happens at the two ends, we will take a share of it. Whether they do well or not, the impacts rest with us. To a large extent, the industry needs re-organisation, but it does not imply that we are not contributing to the economy. I cannot boast that we have done better; we are reflecting the state of the economy in a larger scale. If you consider the investments in the industry, the workforce, taxes payable to the government-P.A.Y.E, corporate taxes; and structures put in place we have contributed to scaling-up of the economy. We need to put up the figures together to understand what the industry is contributing to the economy in general. There are people who are licensed today to just do delivery. They operate without belonging to any association, because today if you can acquire a truck or two you have started operation

With that, don’t you think the industry would encourage quackery?

No! they have licenses to operate but chose not to belong to any association, because they don’t want the challenges of unionisation. We were in a meeting few days ago and some of them are not willing to participate, because there are pressures they may not be able to face. This is so because many companies have gone down as a result of unionism.

But it is believed in some quarters that it is easier for government to checkmate operators through groups or unions. What is your take?

There is freedom of Association. Government cannot compel people to join associations. In the days of President Obasanjo people choice to join either the Nigeria Labout Congress (NLC) or the Trade Union Congress (TUC). And some people have the third option to remain un-unionised

What are the challenges militating against postal sector growth?

There are many of them. I have mentioned the issue of infrastructure. The cost of moving goods, ordinarily, should be cheaper than they are today but the roads are bad. This ought to be a forgotten issue in Nigeria. There are issues with the airlines canceling flights at will; I do not have an aircraft to move my goods from one part of the country to another, so I rely on the commercial airline. We all witness daily how some of them shut down operations and ‘resurrected’ the next day. I was to travel to Kano the other day; I was already at the airport and they announced the flight was canceled. Later that evening it was in the news that the airline was almost going to shut down operations indefinitely, but the next day, they resumed operations. You can see what that does to the economy. A lot of people had meetings and appointments to keep. If there was life and death situation involved, probably, life would have been lost. So, the larger economy feels the impact. The naira-dollar impasses are major issue to all of us. I have international remittances to do; the volatility of the exchange rate does not help matter.

There is a belief that some operators involve in drug-smuggling activity

Honestly, the industry is properly organised, a lot of the operators play according to the rules. The issue about postal companies or individuals aiding drug-pushers to courier their parcel is more of organised crime. No sane courier company will engage in drug-smuggling activity. It is a big (organised) crime. If you go to Cuba and rest of South American countries, you will see how they use money to mesmerise people to carry drugs to places. It is a mega-business, bigger than the courier industry. There is no money in courier compared to the drug smuggling drug business; if ‘we’ (courier companies) are engaged in such we would have been richer than we are today. We are focused on serious business not organised crimes. However, it is not impossible to find Nigerians and other people who would want to smuggle in banned substances; just like they do through the system. Even some carrying their own bags, bought tickets and pretend to be ordinary travelers but stack their luggage with drugs and they are caught. How about those that ingest it; that is not even a courier company; how much of that can a courier company carry. I have not seen a courier company that can carry five kilograms of anything, but people do it. There are situation people try to cheat the system and on our own we reported them to the government. Red Star has been given awards for helping government to track or arrest drug smugglers. We welcome (almost on daily basis) officials of the National Drug Law Enforcement Agency (NDLEA) or NADFAC to work cordially towards to rid the system of banned substances.

Can you please speak about Red Star’s expansion?

We have about 170 offices and agencies across the country. In terms of growth projection, the four pillars that I mentioned earlier, we are trying to deepen what each of them is doing currently. Through RSSS we are providing shuttle services for banks and other organizations. We are trying to deepen such operations without having to mingle into what is not our operational area. People want faster service; technology helps to offer faster services and cut costs.

.

What is the situation with the industry’s operations in North East where the Boko Haram activities are slowing down business?

Gradually, things are returning to normalcy in major part of the North East. Of course, at the height of the Boko Haram bombing, a lot of people closed shops, we didn’t close down rather scaled down operations. We see it as part of the hazards of our job; sometimes, people do riot but we have to continue on our efforts to serve the public. We are also very security cautious. It is also heartwarming that 21 of the Chibok girls have been released while our security operatives have rescued some. It was so challenging that banks shut down for some days; offices shut down, yet we went there to deliver goods.

24 years after, how can you describe the growth of the company?

It has been a long journey. Twenty-four years is also a length of time in the history of the company; we have seen it together. I have been here for seventeen (17) years; which means I have also witnessed ups and downs in those years. It is such a journey that has been rewarding to a very large extent, considering the amount of issues Nigeria has dealt with over the same period. As I said during the anniversary: the owners/founders of this great company have done a great job, because, naturally, the mortality rate for companies is typically five years. I can mention many companies that came up during the same time Red Star Express was established, they struggle to stay alive for five years and thereafter, they fizzled away; not because the owners didn’t have good intentions. But, when you confront some issues that are bigger than you at some points, an economic circle that is tougher than you can contend with, sometimes, the best option is to give up and walk away from the fight. So, staying around for this long means we are committed, focused and favoured by God.