Preamble
I would like express my thanks to the organizers of this very important conference for the opportunity to present a discussion paper on this topic.
This topic in my opinion is fundamental to industrialization of any nation. Without a very well articulated strategy for capacity building in design and fabrication of process equipment and plants for small and medium enterprises, a nation will not only remain under developed, it will continue to remain an exporter of raw materials and human capital. Industry multiplies a nation’s wealth.
It is important we define capacity building and its handshake with the process of industrialization in a nation.
Capacity building is generally regarded as the process by which individual and organizations obtain, improve, and retain the skills and knowledge needed to do their jobs competently and efficiently. Relating this to our discussions, it is the process by which a nation obtain , improve and retain skills and knowledge needed to design and fabricate process equipment and plant for SMEs. A careful review of this definition suggest that the process of capacity building could be targeted towards improving existing capacities or could also imply building capacity from ground zero.
What is industrialization and how does it interweave with capacity building?
Industrialization of a nation is synonymous with the state of the nation’s technological development. It can be defined as the aggregate of internal technological capability necessary to design and produce internally a given percentage of the total national capital production equipment, plants and processes to enable the nation continue development technologically.
Certain criteria are inherently significant in this definition namely: ability to design, ability to manufacture from scratch, ability to innovate or research, quality or efficiency of technological capability and degree of independence in the production of the nation’s capital equipment and plants. In my opinion capacity building to design and fabricate is intrinsically embedded in the definition of industrialization. This will become clearer when we get to needs assessment for capacity building.
If as a nation you design and cannot manufacture, that nation lacks capacity for it has simply designed for other nations to benefit and prosper.
Examples of such cases abound in the history of our nation. The design and invention of the yam pounder was eventually taken through the due process of equipment development and was manufactured in Japan as a finished equipment. Another was invention of the Emergency Auto Transfusion System (EAT-SET) by Brigadier Gen. Oviemo Ovadje (rtd) in 1989 which were also manufactured in Germany.
A visit to many of our research institutes, universities, polytechnics will reveal many designs, prototypes and innovations that could not be taken beyond at best the pilot-plant scale.
Why is this so?
Let us look at our Small and Medium Scale Enterprises (SMEs) in Nigeria and its dynamics ?
SMEs are growth supporting sectors regarded as the backbone of industrial development as their active participation and contributions are indispensable to growing an economy. This is because they always represent the model of economic development which emphasizes the following:
- high contribution to domestic production,
- significant export earning,
- low investment requirement,
- employment generation
- effective forex earning with low-import intensive operations
- shorter gestation period
- ensure equitable distribution of national income
- complement large industry as ancillary units
Looking at the dynamics of SMEs in the country ; have they really impacted on the Nigerian economy in the last 53 years ? I have assumed this number of years based on the fact that the Nigerian Industrial Development Bank (NIDB) was established in 1964 to provide medium and long term credit to existing and emerging industrial and mining firms in Nigeria. In 2001, the NIDB, Nigerian Bank for Commerce and Industries and the Nigerian Economic Reconstruction Fund were fused into today’s Bank of Industry ( BOI) that is in the forefront of providing credits to the SMEs. Despite the support of successive governments and resilience of these entrepreneurs, our SMEs have not done well. From available reports, the rate of survival of the SMEs is less than 5% beyond the 1st year*, their contributions to industrial development is still less than 31% and their contribution to GDP in nominal terms is about 48%.** *- Association of Nigeria Development Finance Institutions ** SMEDAN-NBS Collaborative Report 2013; Association of Small Business Owners of Nigeria – 2017
Many reports on the causes of poor performance of SMEs have always considered finance as the major constraint, but empirical evidence have however shown that finance contributes only 25% to the success.* Others impediments are identified as lack of appropriate support system, lack of enabling environment and obsolete technology.
Obsolescence of technology is evidenced in my opinion by the lack of capacity building in design and fabrication of process equipment and plants. If SMEs are expected to source for foreign exchange directly or indirectly from the same market as the big players who already enjoyed economy of scale for the purchase of their general spares, fund equipment replacement/ modernization and to a large extent their operations, their chances of survival are limited. Needs Assessments for Capacity Building For Design and Fabrication
The above overview gives a background to identifying the needs assessment for capacity building for the design and fabrication of process equipment and plant.
Needs assessments are critical to setting priorities and programme design to promote and catalyze capacity building and this includes assessment of already existing capacity in the country.
- Lack of Industrial Base vis-a-vis Existing Local Capacity
The major processes that govern the science and design of process equipment and plants are
fluid dynamics, heat transfer, mass transfer, unit operations amongst others. The most
common examples of process equipment and plants are pumps, blowers, compressors, heat
exchangers, distillation, and rectification columns, vessels, adsorbers, absorbers, reactors, kiln,
hammer mills, crusher, furnaces etc. These equipment which are by no means exhaustive are
either made from steel or the equipment that make them (that is the parent equipment) are
made of steel. The absence of a virile metal production base, machine tools and petrochemical
plants is already a major setback to fabrication, forging and manufacturing of process
equipment and plants ab initio. This explains the mantra that iron and steel industry is the
bedrock of industrialization.
I recall in the late 80s through the 90s, the Delta Steel Company Limited was providing technical services support to many companies such as National Fertilizer Company Onne, Dunlop, Warri Refinery and Petrochemical Co. etc. The company was collaborating with Peugeot Automobile Nigeria for the development of brake drum for its vehicles using her foundry and workshop. The company also had countless SMEs who depended on her for production of critical spares like shafts, sprockets, chain pulleys, couplings, hammer mills, cupola furnace, screw conveyors, pillar hydrants etc.
Countries like South Korea, Singapore, India, Saudi Arabia identified that base industries such as metal production especially iron and steel, petrochemicals and refined oil are the backbone of a modern industrial economy and they play a major role in supporting the growth of SMEs by providing specialized services to them and at the same time making the SMEs as part of their supply chain. This explains why the SMEs are thriving in those climes because they have a pedestal upon which they solidly stand. In fact India has about 48 million MSMEs that employ over 73 million in 2011 and contributes 45% of industrial output. They account for 40 % of the country’s total export and provides about 1.3 million jobs every year.* MSME Sector Overview- Planning Commission India
The availability of a virile base industries therefore provides an industrial base upon which these SMEs could stand and thrive.
- Lack of Industrial Base vis-a-vis Human Capacity Building
The availability of a good industrial base besides supporting the growth of SMEs, also support human capacity building in the engineering and technical fields. I recall that in not-too-distant past, engineering undergraduates were deployed on industrial attachment to the industries as part of their curriculum. Delta Steel Company amongst others played major role in this aspect in the past. Unfortunately, many of those plants have closed down due to economic downturn in the country and other extraneous reasons. It is now a common sight to see undergraduates and their school authorities looking for relevant industries to absorb these students for industrial attachment programme. The tragic implication is that you have many engineering and polytechnic graduates who have not been to or seen an operating plant before graduating unlike his or her counterparts in other climes who are exposed to manufacturing plants right from the first year in the university. A more direct explanation to the pitiable situation we have on our hands is where do you train a metallurgical engineering undergraduate in Nigeria when there are no operating steel plant. It is also to be noted that the few manufacturing plants in the country have limited spaces for industrial attachés and even at that most of them are managed by private owners who focused more on issues that will promote profit and sustainability of the business than promoting human capacity building for our young undergraduates and graduates alike.
Lack of industrial complexes, specialized small and medium scale industries to promote on-the-job training, capacity building, skill acquisition and skill development is a major constraint as you cannot build something on nothing.
Against this backdrop, how do we then as a nation engender capacity building in design and fabrication of equipment and plant that are unfamiliar to our young graduates and technicians? How then do we promote the symbiotic situations of creating the required enabling environment to promote the growth of SMEs and at the same time promoting capacity building in design and fabrication of equipment and plant in the country. It is a case of the chicken and the egg- which comes first.
- Lack of articulated collaboration and synergy between stakeholders.
There is obvious gap between government agencies, research institutes, universities,
polytechnics on one hand and the industry on the other even when those industries do exist
and operational resulting in the big knowledge gap that would have engendered capacity
building.
- Inadequate funding for research, capacity building and product development even in the universities and research institutes. Only a handful of the organized private sector contribute to funding researches and product development in the country.
- Lack of enforcement of the local content policy in the realization of projects and their operations which would have promoted technology transfer and skill acquisition.
Rescue Policy By Government In the Recent Past
There had been many attempts in the past to promote technology-based manufacturing in the country with the establishment of metal production industries such as iron and steel plants, aluminum smelting plant, foundries, machine tools, metal fabrication workshops, electrical and electronics workshops, refineries and petrochemicals, rubber and leather processing plants and agro-allied plants. As mentioned earlier many of these manufacturing plants have either collapsed, gone comatose or operating at very low capacities for various reasons.
Successive governments have been attempting to redress the situation by introducing reforms such as commercialization, concession and privatization of some of the government-owned manufacturing companies, incentivising and support of the organized private sector and public private partnership initiatives.
The President Goodluck Jonathan administration also in February 2014 launched the Nigerian Industrial Revolution Plan (NIRP) aimed at industrializing Nigeria, diversify the economy and develop the SMEs. The Plan identified the development of the iron & steel sub-sector, agro-allied, oil & gas and construction, light manufacturing and services to unlock the growth in the manufacturing sector. The plan could not be implemented which may have contributed to the the decline recorded in the contribution of the manufacturing to the non-oil sector GDP from 2014 till Q4 2016.
The present administration of President Buhari has introduced an Economic Growth and Recovery Plan (EGRP) and one of the strategic priority areas of the plan is to drive industrialization, with a focus on small and medium-size enterprises. This, the government intend to achieve through accelerated implementation of the NIRP.
Having given the above perspective into factors that affect, catalyze and enhance capacity building in the design and fabrication of process equipment and plant, we can proffer the way forward as recommended below.
Recommendations
- Building institutional capacity by revitalizing our base industries and complexes to make them strategic to our industrialization, capacity building and skill development pursuit. Identifying and conferring strategic importance on these complexes will make the authorities handle them with utmost caution even when they are on concession, commercialized or privatized so that they will still be able to achieve the objectives of establishing them. This act will go a long way to strengthen the existing local capacity required to provide capacity building for end to end design and fabrication of process equipment and plant.
- Incentivise support given by SMEs and other industrial complexes or establishments for the training of undergraduates and any form of collaboration with the academia.
- Review the educational curriculum of universities, polytechnics to include compulsory course in computer aided design and industrial training at all levels.
- Improved funding of research and other product development.
- Re-organize the skill acquisition program in fabrication, welding, non- destructive testing techniques and procedures
- Review the local content policy and incorporate in all engineering projects to engender technology transfer, skill acquisition and human capacity development.
I thank you for reading
Engr. Anthony Madagua was a former CEO of Delta Steel Company Ovwian -Aladja Delta State-Nigeria’s premier integrated steel plant. He is currently the Managing Director of Peatts Engineering & Development Company.
