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 1 :A case study of paint manufacture in Nigeria
Eng. S.I.C. Okoli – Protective Coatings Manufacturers Nigeria
(PCMN)
Part 2 : Measuring local content in manufacturing
Dr. Michael Warner – Local Content Solutions
Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria
Overview
Part 1 – Case History of establishing paint manufacturing in Nigeria
Paint 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 industry
What metrics to measure Nigerian content?
• General
• Specific to paint manufacture
Conclusion
Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria
Overview of PCMN development
100% local manufacture
100% Nigerian ownership
Manufacturing
license signed
PCMN becomes Plc
60% Nigerian ownership
Semi finishing
40% Nigerian ownership
Distribution license
Fully imported product
100% foreign ownership
2000
2002
2004
2006
2008
2010
2012
Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria
2014
Overview of PCMN personnel development
250
150
Nigerian
Ex-Pat
100
Manufacturing commences
50
Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria
2015
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
0
2001
Number of staff
200
Overview of PCMN capacity development
New factory proposed
2015
800000
600000
500000
400000
Imported products
300000
Nigerian Manufacture
200000
Capital expansion Phase II
increases capacity
100000
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
0
2000
Import / production levels
(litres per annum)
700000
Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria
Importance of paint manufacturing
• 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
Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria
Local content levels in paint manufacturing
Nigerian heavy duty
protective coatings
market estimate
14
Million litres per annum
12
10
8
Local content
requirment
6
Total market
4
2
0
2012
2013
2014
2015
Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria
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
Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria
Advantages of license technology
Licensee
Access to world class products
Reduced product development costs
Quick establishment of product range
Support from technology provider
Licensor
Access to market
Zero capital investment required
Reduced logistics
No in country footprint required
Economy
Increased employment opportunities
Support for infrastructure projects
whilst benefitting economy
Access to current technology
Encourages capital investment
Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria
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
Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria
Capacity development (continued)
2000
2002
2004
2006
2008
2010
2012
Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria
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)
Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria
Overview of PCMN personnel development
250
150
Nigerian
Ex-Pat
100
Manufacturing commences
50
Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria
2015
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
0
2001
Number of staff
200
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.
Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria
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
Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria
Part 1 :A case study of paint manufacture in Nigeria
Eng. S.I.C. Okoli – Protective Coatings Manufacturers Nigeria
(PCMN)
Part 2 : Measuring local content in manufacturing
Dr. Michael Warner – Local Content Solutions
Measuring local content in manufacturing:
A case study of paint manufacture in Nigeria
Background to metric selection
• 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
Measuring local content in manufacturing:
Selecting Nigerian content metrics for the paint industry
Key areas of measurement
• Measures identified to
I.
Manufacturing
and services
II. Identify the suitability of
the business to serve the
market
Investment /
ownership
•
Importation
Indicate Nigerian content
Currently being finalised prior
to initiating monitoring
Training
Employment
Measuring local content in manufacturing:
Selecting Nigerian content metrics for the paint industry
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?
Measuring local content in manufacturing:
Selecting Nigerian content metrics for the paint industry
Sample measures – manufacturing and services
Metric
Volume manufactured in Nigeria per annum since start-up as a % of total
volume sales
Manufacturing capacity of Lagos operation per annum since start-up
Accuracy
Proxy
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
Measuring local content in manufacturing:
Selecting Nigerian content metrics for the paint industry
Sample measures – manufacturing and services
Metric
Accuracy
Local 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
$ value of service contracts awarded to nationally registered vendors per
year as a percentage of overall sub-contracts
% nationally registered vendors on company vendor register
Measuring local content in manufacturing:
Selecting Nigerian content metrics for the paint industry
Erroneous
Accurate
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?
Measuring local content in manufacturing:
Selecting Nigerian content metrics for the paint industry
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
Measuring local content in manufacturing:
Selecting Nigerian content metrics for the paint industry