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Building a better Rivers State

Interview - August 23, 2012
Gilbert Sassine, the managing director of Lubrik Construction company describes how his business can help build infrastructure and prospects in Rivers State.
GILBERT SASSINE, MANAGING DIRECTOR OF LUBRIK CONSTRUCTION
GILBERT SASSINE | MANAGING DIRECTOR OF LUBRIK CONSTRUCTION

Goldman Sachs has identified Nigeria as one of the 11 economies that will have the most impact on world economics in the 21st century. However, the reality is that the international community still misconceives Nigeria. What is the most important thing for the international community to understand about Nigeria in terms of where you are now and what is changing?

There are two aspects to Nigeria: the business aspect and the cultural aspect. To succeed in the business aspect you need to understand the cultural aspect; how Nigerians think, how they work, their strengths and their weaknesses. With this in consideration, it is easier to understand the whole picture and things can function properly. Given that both aspects are important in running a business here, it will be difficult for any company to run its business in Nigeria from an office in London or anywhere else in the world. The stories you will hear about Nigeria will cause you to panic even though the stories may not actually be accurate with what is actually happening. It is therefore important to be on the ground, in Nigeria to see how things function. 

One major problem in Nigeria is that several companies do not deliver standard services because they lack the competence to execute the work. Sometimes, projects are assigned to people without expertise or experience. This results in finished projects that are not standard and create a long term problem.

Such knowledge is important when doing business in Nigeria. If you find good people to do business with, opportunities will open up. The Nigerian population is above 160 million, so there is a huge market to serve. Nigeria has some states that are larger than some countries in the world and they have their own economies and needs. You can apply any business on that scale in order to attract industries, and traders.

With a bit more organisation, there is no reason why Nigeria will not be the next booming economy. Well, actually we are already booming, but we can always do more to attract investors that previously would not have thought of investing in our economy.

The thing about Nigeria is that people perceive us differently. There are investment opportunities that most people do not know about. I have a relative that works as a fund manager on Wall Street. Eight years ago, he invested in Nigerian stocks through various consumer companies, and over the years, these are the few stocks that have made a lot of money. Even now, if you follow the Nigerian Stock Market, you will see that everything is going down except the consumer market. There is a huge market for certain industries and all of their products are being consumed. With an improved image, we could have a much broader reach for investment opportunities in Nigeria.

In regards to the construction sector, the Nigerian government has undertaken infrastructure development as a priority, investing heavily in road construction and bridges. Could you assess the general state of infrastructure development in Rivers State?

With regards to infrastructure, Rivers State is spending more money than the Federal Ministry of Works. The Ministry of Work’s budget for 2012 is 80 billion naira and Rivers State’s budget is about 94 billion naira.

What the House of Assembly approves for the Ministry of Works is normally much less than what they put in the actual budget. However, in River State, the construction budget always has additional costs. It is never less than what is forecasted.

In my personal opinion, the key to infrastructure development in Rivers State is the government. His Excellency believes that infrastructure is the key to any other development and he has structured his plan around construction projects. This is the reason why there are road constructions everywhere in Port Harcourt. There is no area in the main city of Port Harcourt that is not undergoing road works.

Roads in Rivers State cost a lot more than roads in other countries like Ghana. The cost of roads in Rivers State is the highest in the world for two main reasons. Firstly, the soil in Rivers State is not very good, and the materials used are difficult to deliver and very expensive. In the northern part of Nigeria, their ground is solid and does not require any filling as is the case in Rivers State and the fillings are expensive. In addition, Rivers State has a lot of heavy rainfall and so you need to provide for a proper underground storm drainage which is also very expensive. Also, the Governor loves beautified roads. He loves medians with flowers inside, streetlights, and sidewalks. This is the trend that the government sets and you have to deliver on the design which is given to you. 

The Governor is young and very active. He is always interested in the engineering side of the projects and on several occasions, he visits the sites. This puts pressure on the contractors to deliver a high standard and to deliver on time. He is constantly requesting for updates on constructions and talks a lot about infrastructure jobs and the potential to do more infrastructure work. He is focused on getting the job done and getting it done quickly without compromising the standard.

Normally, in Nigeria, it is often very difficult to get paid for these types of projects. It can be a long frustrating process, but in Rivers State, it is very easy because we have a strong focus on the end result.

In Nigeria, we do not have a lot of infrastructure. When you go to other countries like Germany, England or America, you see that the infrastructure is so advanced that you hardly notice it. But when you look at Nigeria, you can see that we are aiming for just the very basic principles of what most developed countries already have. The main needs in Nigeria are infrastructure, and power. Without power you cannot operate industries, which is very important, and if you don’t have roads linking areas for transport needs, you will have a very big problem.

This is why infrastructure is priority before anything else. Infrastructure will open and expand the economy. All the construction companies have work to do, we are constantly busy. As you rightly observed, there are massive projects going on, but instead of focusing on the number of roads being built, I’m more concerned with the quality and location of the construction projects. Due to the previous regime changes over the years, a lot of these projects have been left incomplete and some of them have just disappeared. However, I believe that what is being developed now in Rivers State is being built to last and will serve as a landmark as to what this government has achieved.

Lubrik Construction was incorporated in 2007 and since then, your contribution to the development of Rivers State has been quite substantial. What have been some of the milestones for the company since 2007 and what are the key reasons as to why Lubrik is becoming the market leader in Rivers State?

First of all, in 2007, we incorporated Lubrik Construction with the belief that Nigeria lacked good construction companies, especially in the south. Our main focus is Rivers State and we really believe that this area has a lot of potential.

After our incorporation in 2007, we started operations on small projects in different areas. The main project that kicked off the company was the Life Camp here in Rivers State in 2008. Total was doing an upgrade on their oil facilities and we did their Life Camp infrastructure. From there on, we began to work with the government on building roads. At first, we financed the project because the government did not have the money to undertake the project at that time. This led to our first project, Azikwe Road, which is the road that leads to the Rivers State’s government house. 

We embarked on the project with PFI, Public Finance Initiative. This is where the contractor finances the project and the government commences repayment after some milestones. The relationship was very successful in terms of the transactions and the project itself has turned out to be a landmark. This was the foundation of the trust relationship between LCC and the government. We used this opportunity to build the government’s confidence and to show that we are a serious company that can deliver high standards and we have good financial sense. From then on, we moved on to many more projects with the government.

Since the beginning, the relationship that we have had with the government has not been one of client and contractor, but a relationship built on trust. There have been times when the government has not been able to pay us immediately, but this does not stop the work. We continue working until the government can pay us and I think we have built up a lot of trust working this way. They can rely on us to deliver. They do politics and we do construction and that goes hand in hand. If you have elections, you have to have roads and you need to deliver to satisfy the voters. Unfortunately, at the end of the day, there is not enough money to satisfy everybody, so as a construction company, we must have a conscience. You have to be able to look at the situation and see what you can contribute. This is the spirit of our company, LCC, and that is how we have become a market leader.

Secondly, we offer the highest quality. I do not make this statement out of arrogance. Technically speaking, our works are ranked by multi-national consultants as the best quality delivery in Rivers State. We are very proud of that.  We have sustainability in our quality, the same quality of product always gets delivered so we offer the same standard across the board. 

Thirdly, we have something that was also attractive to the government: our prices. We are not cheap, but our quality/price value cannot be beaten at this time. You may have other companies that do the same thing that we do; the same engineering methods, and the same specifications. But our prices are about 30% to 50% cheaper than what they offer.

Is it true that you are saving the government around 40%?

Well, I’m saying that if somebody else wants to deliver the same product to the government, there would definitely be a price gap of about 35% to 40%.

How do you manage to achieve such high performance and still be economically viable?

We are properly structured. We don’t have corruption. We are a professional body that makes profit, but our main concern is getting projects. If getting new projects requires that we cut off part of our profit, we will do it because we are looking into volume more than high profit percentages. We are profitable, but we also concentrate on maintaining our reputation as a clean, efficient company. We compute our costs, we add our mark-up and we deliver. 

There are few companies that can do what we do and while some companies may take advantage of this and set the prices the way they want, I do not work like that. I work on a professional competitive standard. My biggest contracts have been won by pure tender. For example, some of my tenders have been published in the Times, Forbes, the Economist, and other widely read publications. Out of 38 multinational contractors, I emerged as the winner of the bid due to financial and technical pre-qualifications. This is a contract where the consultants and supervising body were South African so it was free of any politics and unfair practices. We emerged as the winner which proves that we have a professional edge over the rest that is not political or ownership driven.

In terms of Nigeria’s Local Content Act, the government is aiming to retain revenue within the country across all sectors.  Lubrik Construction consists of over 98% indigenous and around 90% of the products that you use come from within Nigeria. How do you manage to achieve these levels in an industry that quite commonly, especially in Africa, requires a lot of foreign expertise?


It is simple. It is a top management decision. You either want to do everything in order to increase your profit margin or you decide to do things on a priority level.
Basically, all of our materials are local, especially in infrastructure projects. Stones, asphalt and cement are produced by local factories. The most significant impact of this is that all bulk materials are provided by people who run small or medium businesses locally. Here, we call them suppliers; they supply us with sand, gravel, and other materials. We have about 200 or 300 suppliers that work with us on every contract. This is not an obligation. It is a choice. And it is quite easy for us because we can focus on our product and delivery rather than going through long supply chains where we would have to worry about overhead and transport matters. I believe economically its better for us to sublet them instead of running them ourselves.  It lets us run a lot of projects at one time without worrying about every aspect of the product chain.

It is also economically viable because we have whole families that are working with us. Their revenue revolves around us. This gives you  comfort because you are working with the community. There is a wealth sharing system in motion. With each project, we are investing in our community and everyone benefits. Even the government enjoys this process because they can see that people in the communities are really profiting from this economic cycle.

You have to consider not only the delivery of your product, but the impact on the people living in the community. If you intend to spend 40 years in infrastructure development, it means that you have to consider empowerment, employment, and quality of life. In order to do this successfully, you need to hire a company that already has these standards implemented and that is why we are where we are today.

In 2010, Nigeria had around $5 billion dollars in foreign investment and that has risen to $6 billion dollars recently. This number accounts for 50% of foreign investment in the total West African region. There is a lot of interest coming from outside of Nigeria. What advice would you give to foreign investors that are looking into Nigeria?

I believe that investing in Nigeria is not as risky  as people think. It is a calculated investment with high yields but if you are looking for 50% returns on your investment, you are in the wrong place. Even in a stable economy, you are not likely to have returns like that. Investing in Nigeria is a good opportunity for many sectors. We are not a fully viable market, but there are some sectors where you definitely have a sure bet and others that have a good yield. What I can tell investors is that the only risk they will take is deciding on which area to go into. Once you decide where to invest your money, there is no risk as long as it is a properly managed business.

We have invested directly from abroad when we started and we have made our money back. We are doing yields and so on. Nigeria is a sure yield and a sure return. I do not see any risk besides making the decision to invest in Nigeria and this is a personalised risk, not a generalised one. I believe that investors, in comparison to other emerging economies in the world, will realise that Nigeria is appealing and lucrative.

What is your personal take on leadership and do you have an inspiration?

Leadership is quite important and you need to have a vision. The key to delivery and to realise any of your ambitions is teamwork. You need to have a good team. I am quite young and I started all this, but I did not do it alone. I delegate a lot of authority and I believe this is the key to our success. Every single employee has an important role in this company and I am lucky to have such talented dedicated people that share the same ambition as me. Anybody that has a similar outlook, theory and has a wealth of experience is an inspiration for me.

The bottom line is all about teamwork and dedicated people. One person alone cannot do anything in Nigeria. Maybe in the US, it is easier to work alone and create a good company, but in Nigeria, you really need a very dedicated team.
 

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