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Measuring local content in manufacturing: A case study of paint manufacture in Nigeria Dr. Michael Warner – Local Content Solutions Eng. S.I.C. Okoli –

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Presentation on theme: "Measuring local content in manufacturing: A case study of paint manufacture in Nigeria Dr. Michael Warner – Local Content Solutions Eng. S.I.C. Okoli –"— Presentation transcript:

1 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)

2 Part 2 : Measuring local content in manufacturing Dr. Michael Warner – Local Content Solutions Part 1 :A case study of paint manufacture in Nigeria Eng. S.I.C. Okoli – Protective Coatings Manufacturers Nigeria (PCMN) Measuring local content in manufacturing: A case study of paint manufacture in Nigeria

3 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

4 Measuring local content in manufacturing: A case study of paint manufacture in Nigeria Overview of PCMN development Distribution license Fully imported product 100% foreign ownership 100% local manufacture 100% Nigerian ownership Manufacturing license signed Semi finishing 40% Nigerian ownership PCMN becomes Plc 60% Nigerian ownership

5 Measuring local content in manufacturing: A case study of paint manufacture in Nigeria Overview of PCMN personnel development Number of staff

6 Measuring local content in manufacturing: A case study of paint manufacture in Nigeria Overview of PCMN capacity development New factory proposed 2015 Capital expansion Phase II increases capacity Import / production levels (litres per annum)

7 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 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 Importance of paint manufacturing Measuring local content in manufacturing: A case study of paint manufacture in Nigeria

8 Local content levels in paint manufacturing Measuring local content in manufacturing: A case study of paint manufacture in Nigeria Million litres per annum Nigerian heavy duty protective coatings market estimate PCMN Projected capacity

9 License History Measuring local content in manufacturing: A case study of paint manufacture in Nigeria License manufacturing agreement entered into 15 th 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

10 Advantages of license technology Measuring local content in manufacturing: A case study of paint manufacture in Nigeria Licensor Access to market Zero capital investment required Reduced logistics No in country footprint required Licensee Access to world class products Reduced product development costs Quick establishment of product range Support from technology provider Economy Increased employment opportunities Support for infrastructure projects whilst benefitting economy Access to current technology Encourages capital investment

11 Capacity Development - Challenges Measuring local content in manufacturing: A case study of paint manufacture in Nigeria 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

12 Capacity development (continued) Measuring local content in manufacturing: A case study of paint manufacture in Nigeria

13 Capacity development (examples) Measuring local content in manufacturing: A case study of paint manufacture in Nigeria 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)

14 Measuring local content in manufacturing: A case study of paint manufacture in Nigeria Overview of PCMN personnel development Number of staff

15 Manufacturing multiplier Measuring local content in manufacturing: A case study of paint manufacture in Nigeria 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.

16 In summary Measuring local content in manufacturing: A case study of paint manufacture in Nigeria 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

17 Part 2 : Measuring local content in manufacturing Dr. Michael Warner – Local Content Solutions Part 1 :A case study of paint manufacture in Nigeria Eng. S.I.C. Okoli – Protective Coatings Manufacturers Nigeria (PCMN) Measuring local content in manufacturing: A case study of paint manufacture in Nigeria

18 Background to metric selection Measuring local content in manufacturing: Selecting Nigerian content metrics for the paint industry 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

19 Key areas of measurement Measuring local content in manufacturing: Selecting Nigerian content metrics for the paint industry Investment / ownership Training Employment Importation Manufacturing and services Measures identified to I.Indicate Nigerian content II.Identify the suitability of the business to serve the market Currently being finalised prior to initiating monitoring

20 Accuracy of measures Measuring local content in manufacturing: Selecting Nigerian content metrics for the paint industry 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?

21 Sample measures – manufacturing and services Measuring local content in manufacturing: Selecting Nigerian content metrics for the paint industry MetricAccuracy Volume manufactured in Nigeria per annum since start-up as a % of total volume sales Proxy Manufacturing capacity of Lagos operation per annum since start-up 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

22 Sample measures – manufacturing and services Measuring local content in manufacturing: Selecting Nigerian content metrics for the paint industry MetricAccuracy 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 Erroneous $ value of service contracts awarded to nationally registered vendors per year as a percentage of overall sub-contracts Accurate % nationally registered vendors on company vendor register Proxy

23 Local content in manufactured paint Measuring local content in manufacturing: Selecting Nigerian content metrics for the paint industry 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?

24 Conclusion Measuring local content in manufacturing: Selecting Nigerian content metrics for the paint industry 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


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