By Sisaa Agboh
With the recent inauguration of the overN50billion Sunti Golden Sugar
Estates in Niger State by President Muhammadu Buhari,the face of the
Nigerian Economy is undoubtedly changing; courtesy of thereform and
privatisation programme of the Federal Government of Nigeria.
Located on the banks of River Niger,in Mokwa, Niger state, the Sunti
Golden Sugar Estate is owned by Sunti GoldenSugar Estates (SGSE) Ltd, a
subsidiary of Flour Mills of Nigeria Plc.
The sugar estate features 17, 000hectares of irrigable farmland and a
Sugar mill that processes 4,500 metrictons of sugarcane per day. At full
capacity, the estate is expected to produce1 Million tons of Sugarcane
which roughly translates into 100,000 metric tonsof sugar yearly.
Enclosed within a 35-kilometer dyke,the production facility area is 15,100
hectares, with a cane area that featuresa maximum output of 10, 000
hectares.
The dyke provides flood protectionfrom the River Niger. Over N1 billion
was invested in the state-of-the-artirrigation system that will ensure the
efficient cultivation of sugar cane,with infrastructure that includes
drain pumps, pump stations and a power grid.
The estate no doubt, is the purestrepresentation of the Federal
Government’s Nigerian Sugar Master Plan (NSMP)with an ambitious backward
integration program that intends to set Nigeria onthe path to
self-sufficient sugar production. The farm at peak production willprovide
direct employment for about 10,000 people yearly, and impact up to50,000
people indirectly, including 3,000 small-scale out growers who will
becultivating sugarcane to feed the mill.
The estate has brought infrastructurebenefits to the surrounding
community, with 28 communities in total takingadvantage of a new
30-kilometer road, plus expansive road networks that providea variety of
access routes to the homes of the indigenes. Drains, culverts,
andflood-protection walls have also been constructed. The project
illustrates thedesire to reduce sugar importation, save billions in
foreign exchange, boostlocal capacity, and reduce unemployment by putting
thousands of Nigerians towork.
The commissioning of the sugar factoryis the first step towards a
collective dream of agricultural progress for allin Nigeria; and clearly
demonstrates that businesses are better handled by theprivate sector hence
the need by all Nigerians to embrace privatisation.
Perhaps, it is apt here to delve intothe history of the now burgeoning
sugar factory. Sunti SugarLimited, a government owned company was
established in 1974 as a private limited liability company, with ashare
capital of N100 million and percentage ownership of 90% and 10% to
theFederal Government and Niger State Government respectively.
The company with a land mass of 17,000 hectaresfor sugar cane production
was not cultivated to its optimal potential neitherdid it process sugar
since its inception as it did not have a refinery inplace. Rather, the
harvested sugar cane from the farmland was transported tothe Nigerian
Sugar Company (NISUCO) for sugar production.
Then,it was a company whose liabilities weregreater thanthe assets in
manifolds. Its assets weremainlyfarmlands, most of which were
notcultivated, agricultural plant and machinery, motor vehicles
anddilapidated buildings. The companys factoryat the time was not
completed and the uncompletedfactory components were left to waste away
inthe openfields.
While the company did not yield profit to theFederal Government, it
incurred debt of about N615 million, owed largely to theFederal
Government, with some amount owed local creditors.
Following due diligence carried out by the Bureauof Public Enterprises
(BPE), the untapped potentials of the company was juxtaposed with the
growing debt profile and theburden on the governments treasury and upon
this, the resolution to privatisewas reached.
At the initial attempt, its privatization wasunsuccessful primarily as a
result of the large debt burden the company hadincurred through the years
it was under-utilised. The report of the BPEsprivatisation advisers
revealed that the proceeds to be realised from the salewould not be
sufficient to pay off creditors and settle staff liabilities. Theadvisers
consequently recommended asset sale, through liquidation, as thefavourable
method of privatisation.
Following the recommendation, the BPE obtainedapproval of the National
Council on Privatisation (NCP) in July 2003 toliquidate the company as
well an approval from the courts in February 2005 to wind it up.
Asimplified bidding process duly followed the NCP approval of 2004 for a
guidedliquidation process which produced SupertekLimited as the preferred
bidder after been found to be responsive to the terms of the transactionby
the Committee of Inspection (CoI) and the CoIsfindings that Supertek was
capable of realising itsenvisaged investment. It was upon this that
Supertek emerged as the new owner of the companywith an offer price of
N180 million.
There was transfer of ownership of thecompany to FMN. Under the new
management, the company took the name SuntiGolden Sugar Estate, a
subsidiary of FMN. It has since made a departure fromthe pre-privatisation
days.
Sunti Golden Sugar Estate has since embarked on developing the first
newsugar project to boost local sugar production in the country. To
facilitatethis, the company selected Booker Tate as its technical partner
to assist withspecifications for the project including factory design,
contractor selectionand final negotiations. Thus far, harvesting ofthe
first sugarcane, commissioning of the factory, and processing of the
firstcane into saleable sugar was achieved in 2016.
The new owners have also put measures inplace in anticipation of future
demands. These measures include the installation of the latest technology
of3,000 tons per day factory and a planned capacity expansion of 4,500
tons perday in cane milling and processing, as well as a system of canals
and dykes to provide irrigationduring the dry season and flood protection
during the wet season.
Recall that this is not the first time, aprivatized enterprise will be
making giant strides on the Nigerian economy.ElemePetrochemicals Company
Limited (EPCL), located in Port Harcourt, Rivers State,is one of such
shining examples.
Apetrochemicals complex originally fully-owned by the Federal Government
of Nigeriaand commissioned in 1996, EPCL was never managed properly, at no
time operatedto its potential, and was a significant loss maker and drain
on the Statetreasury.
Thecompany operated for about nine years from 1996, never operated
effectively,although it was technologically a state-of-the-art facility.
Severe managementproblems and continuing financial losses led to the
Federal Government’sdecision to privatise
In2006, EPCL was privatised by the sale of 75% of its shares to a core
investorthrough a competitive bidding process. Little international
interest wasattracted. The company was sold to Indorama Group for $225
million, withoutliabilities which were retained by the FGN. Much of the
acquisition cost wasfinanced with debt, with the IFC lending Indorama $150
million for theacquisition cost and the new Eleme borrowing $130 million
for its turnaroundprogramme and working capital.
Itis interesting to note that the available report on EPCL stated that
“theabsence of the two-year turnaround maintenance (TAM) of the company’s
plantsand facilities made it impossible for the company to
achieveprofitability” and “the level of the company’s indebtedness…
alsogreatly hampered the company’s ability to achieve profitability”,
whereasafter four months of turnaround maintenance, the company was
operating at ahealthy profit; for the first full year of operation earned
a net profit marginof 36.1% after tax; and in the second full year of
operation had increased itsnet profit margin to an astounding 43.4% after
tax. The company was able to payits owners a dividend of N9.5 billion
(approximately $74 million) after onlyone year of operation.
Thatsaid, the dismal performance of public enterprises is a direct result
of manyfactors that make efficient operation difficult. Such factors
include lack ofadequate investment capital, slow decision making process,
bureaucraticbottlenecks, frequent government interference, economic
decisions based onpolitical expediency and massive corruption of public
enterprise managers incollaboration with officials of the supervising
ministries.
Theprivatisation vision is encapsulated in the reform programme whose aim
is thedevelopment of the entrepreneurial abilities of Nigerians, the
widening ofavailable economic opportunities and the creation of a
judicious economic mixand intervention mechanisms that would bring about a
conducive businessenvironment. The overall aim is that investors, who
demonstrate capacity to addvalue through efficient provision of goods and
services, have the chance to doso. This involves putting back to effective
use, public enterprises that aremoribund or not providing the required
services. It also entails providing theopportunity for operators to
participate competitively in the expanded businesshorizon leading to an
enlarged and active private sector driven economy.
Sunti Golden Sugar Estates and ElemePetrochemicals Company Limited are
prime cases that project the positive impactof privatisation on the
economy.
Agbohwrites from the Bureau of Public Enterprises (BPE), Abuja