‘Africa need to start Focusing on Industrialisation’ – Adegbite
As Chief Executive Officer of Marine Platform, Taofik Adegbite is charged with the overall responsibility of strategy formulation, performance monitoring and improvement for the company. Prior to his assumption of the role of Chief Executive Officer, he was the Director of Strategy and Business Development. He holds a B.Sc. (Hons.) in Computer Science from the University of Ibadan, a certificate in Strategy & Organization Management from the London School of Economics and he is a graduate of Harvard Business School OPM 44. Taofik started his career with Agricultural Project Monitoring & Evaluation Unit, (World Bank Project). He later proceeded to the UK where he bagged his Cisco certification and worked on contract with NHS (Hammersmith Hospital) as an IT Engineer. In this brief chat with Orient Energy Review, he speaks vibrantly about is company, the progress of the Nigerian Content Act so far especially in the Maritime sector amongst other issues of national interest. Exceprts.
What model did you deploy to reach this enviable height?
The God dimension is important anyway, marine platform is set on God’s principle, but I think critically, any business must have one: the mental discipline, two, deferred gratification, and if marine platforms’ success can be articulated in the temporal, it is simply deferred gratifications, where you plough back profitability not to develop personality and lifestyle, but of cause to grow capacity; human and material capacity, for the business sustenance that is what Marine Platform’s success is being linked to. 90% of our success is based on that but we plough back to the business to build human and material capacity, and by doing that, we have been able to transit from renting equipment from foreign companies, to owning equipment. As you know, the local Yoruba adage says that, “the owner of the hoe is the owner of the farm”; so he who owns the equipment, owns the job and that is what has sustained Marine Platform over the years. Owning the equipment doesn’t come out of the blues, it takes one having that mental discipline; two, deferred gratification where your profitability is retained in that business to grow capacity, so that is simply what I see.
I remember two years ago in Accra, you talked about how you started off with bank loans, getting jobs outside? Nigeria, Accra precisely and how you were able to execute that job at a loss, and then how you were able to pay back the loan. Do you still use that model or did anything changed?
I remember I was saying it that the essence of going outside Nigeria to go and operate is that we needed to create awareness and not to be seen as a one-client company. We wanted our footprint on other fields, which is important especially in deep water space; where you have worked to show on your company’s experience. We were able to discount, going to the Jubilee field, especially knowing that it was on the world map for the attention even though profitability wasn’t equal to what we were making in Nigeria. So it was a strategic decision, more than a business decision.
You move beyond renting equipment from foreign companies to owning them; are you also planning to have a facility in the country with regards to government recent policies on promoting industrial revolution via parks.
Absolutely. We already acquired land in Onne to build a multi-purpose facility there; we have finalized all that relates to the construction work. We had a glitch with regards to what was going to happen to Onne especially because of the Intels-NPA face-off but we are glad that it has been resolved, so we are progressing. It is a facility where we are looking at having our pressure testing, and clean room. So, that is the next level for Marine Platform in the pipeline. It is already budgeted for.
What do you think about business financing in Nigeria, how have you fared?
The same thing, if you do not have that mental discipline, the business is dead ab initio.In Nigeria, the interest alone is outrageous! How would you sink in 25%-27% profitability ratio, it is dead. The interest rate regime naturally does not encourage profitability ratio in Nigeria. Secondly, until and unless we externalize government borrowing, it will compete and crowd the finance space. As we know it, treasury bills are on 15%-20%, that naturally will make banks complacent as they will not be incentivized to lend to the real sector. If you can lend to government, which is guaranteed via treasury bills, why bother myself lending you 100 million when you are going to pay in 3-5 years which with all the risks associated? I would rather, as a bank, lend to government at guaranteed 20%. So finance is the number one“No-No”! As an investor, will you not rather buy treasury bills than set up a business, knowing you will not recoup your investment from such business until about 5-10 years?
You are successful, so how do you manage that?
Like I said deferred gratification and that mental discipline. Just take out your personal interest, your ego and the rest lifestyle of affluence. It’s natural to wonder: “How will you make money and not go for the wonderful things of life, instead you start building a brand”. That is the reason why you are not seeing a lot of start-up and organically-grown businesses in Nigeria. What you see are opportunistic, government-assisted, acquired government venture so as to have that platform to launch out. I mean you buy a moribund government sector, sell the assets, and start raising money. There a lot of them around today.
I recently saw your advert on CNN, what you are doing with Skye bank
Yes, that was to tell the Skye bank story as not too many banks were able to act like they did at the time we needed the support. At our early stages, no one would touch us; they would rather go for safer zones, but Skye bank ventured with us and that is commendable.
Now you own vessels, is it encouraging and would you have loved to own a lot more?
Maybe we would have built ten today, because we would have loved to build more but the problem is, it is not so easy building two because, it is only when you shut down the engine of the boat, you keep spending money. Operational expenses would come on you; so when you have reduced revenues, reduced opportunities, you would want to force it down on your sub-contractors. I mean, it is not as easy as you would want. It is largely dependent on the operators. Opportunities for them are not opening up any more, so you are constrained and confined in a small space. Now, the critical element is, you now have excess capacity because it is a global phenomenon; so you have excess tonnage from abroad that are now focusing on your market, and because of that cheaper interest rate regime, they are more than delighted to take out of your quantity at reduced prices. So the operator left between the devil and the deep blue sea because they want reduced cost to pursue but must respect the local content law. It is not so easy for them. We respect their situations and are constantly considering how to further squeeze cost down, without breaking. Also, this is an industry where safety is so important and records should be intact; and you don’t want to squeeze too deeply that you would compromise safety and cut corners. Everybody is having a serious, delicate balance to strike here, so it has not been so easy. However, we keep pushing on and keep looking for innovative ways to tackle the challenges we face.
You have friends in ‘’high places’’, have you taken advantage of the Cabotage Vessel Financing Fund?
I tell you, I don’t have friends in “high places”, Marine Platforms is non-partisan, and we are not politically exposed. We build relationships, but again it comes to a moral dilemma. Let’s say it is the minister of transport who sits on the Cabotage Fund, and he considers the volatility of Nigeria, how very petty the polity has become and doesn’t want to release the fund to avoid a scenario whereby such fund will not actually go do what they are supposed to do. If that happens, it will damage him completely because the day he releases the fund, it would be seen as already polarized. If he gives some, they would term it his friends; if he gives a Northerner, they could say it’s Buhari-inspired; if he gives one from Niger Delta, it would be his clans; so the man is trying to find out how he is going to approach it in the midst of all these issues. Because he is stalling as a result these, the microcosm of private players and associations in the industry are trying to come up with a clearly-articulated modality, and procedure, which will be transparent, professional and ethical, such that outcomes can be predicted. We shall pass on this document to the minister through NIMASA, so that we can come up with something very transparent and workable such that it won’t be compromised and it will expand the capacity building which the CVFF is meant for.
The same goes with the NCD fund, however NCD is already out of the station because the issue of partial guarantees has been handled and the administration is being able to put some monies through Bank of industry, so we are seeing an out-of-station kind of experimentation on the NCDMB side. I also think that the bad experience of National Shipping Line, and of Aviation Fund that they had in the transport section is what is holding back the CVFF, but I think we are getting there, the discussion has started and hopefully, we will be able to come up with modalities that will make it happen.
What do you think Nigeria and Africa should focus on beyond 2018, particularly now that fracking cost per barrel is being driven down, I think is something around $40?
We should move away from subsistence in Africa, because we have been in subsistence for too long in Africa and we should start going to industrialization. Honestly and respectfully, I think the Dangote industries are leading the pack that see even in the non-oil sector. We have seen now that cement is being manufactured from the limestone we have here. Instead of exporting the raw materials, we have it processed here, you can imagine the ripple effect it has in the economy. So, if you flip into the oil and gas space, we still need the associated industry to come and benefit from it, like the petrochemicals. When Dangote begins refining like a million barrel or 1.5m barrel daily, it means we will have very little to export because we are producing 2 million barrels. If there are more refineries, it means we will be exporting refined products like petrol, kerosene, diesel to the world and that would give us huge benefits. On the contrary, when you export the crude, you are only developing those societies involved in the associated products. I think moving away from subsistence, if you like, to industrialization is what Africa should focus on, yes we are seeing that being championed by these few companies, but I think that is what should be encouraged. So incentives for such and various macro incentives, tax incentives, tax grace, waivers, and all of that are items government stimulus points should come into so as to get us out of the subsistence level. I think we are slowly but surely getting there.
Talking renewables and going green, the World Bank have said it would not fund exploration activities anymore, how do you see Africa handling its energy needs against this developing trend?
World Bank is largely developmental in their approach. What is the size of projects they have been funding before now? How many businesses have come up to say they secured purchase of drilling rigs from World Bank? The number is quite low. They would rather sponsor mining of precious minerals like gold, copper, and more in places like Liberia, Sierra Leone and other East African places just coming out of wars. They are moving their guarantees away from stable commodities like oil to focus on developmental activities.
It has been businesses and business monies that have financed projects in the industry. But, what you might start seeing now is, the likes of the Norwegian Export Finance, and other sovereign wealth funds saying they don’t want to go into that space again. What that does is that it reduces the equity that is in the oil and gas space, it increases prices. The danger is that the world should already have gone into sufficiency in alternative energy, because what will happen is that if the cost of the crude is getting high because there are fewer funds going after it, what you are seeing is a spike in the price of the product. So, if the World Bank statement is over-dramatized or sensationalized, it starts rippling other funding or muzzling other funding, and the world is not ready for alternative energy to feed the needs, consequently, we are still going to see poverty growing because there will be increment in the final price, which will ripple in the price of other commodities and services like a cycle. The man whom the World Bank wants to take out of poverty will further go into it, so that is the possible future and why it is not attracting any serious interest in international discussion.
What is the next big thing for marine platform?
We have had the 2002-2007, 2007-2012, 2012-2017, so we are in the 4th strategy period of 2017-2022,and that is when we talk about our financial re-engineering, that is what we are trying to do now especially, of cause diversification. So primarily, we have started looking at cheaper sources of funding, reducing our cost, and if we do that, we will move into profitability and start de-risking the business by looking at associated areas that we can go into, that is what our next idea is all about, which started last year, 2017-2022.