Simon Kolawole’s Watery Cement Argument

If you think the problems we create are bad, wait for our solutions” – Government

Simon Kolawole is back pushing his argument for the justification of phasing out 32.5 grade cement in Nigeria. In his latest backpage column for ThisDay, he tells us how a part of a building site behind his house collapsed last week Friday. As is the case when these things happen, it’s always a tragedy and people are injured if they are lucky enough not to lose their lives.

However, in record time, Mr. Kolawole has managed to investigate this building collapse in 48hrs and concluded that it was caused by low-grade cement (in fairness, he admitted later in the piece that cement grade is not the only cause of buildings collapsing). He then goes to throw a few jabs at people (like myself) who were opposed to banning 32.5 grade cement [emphasis mine]:

Recently, when I added my voice to the clamour for the standardisation of cement in Nigeria from 32.5 megapascals (mpa) to 42.5 mpa – which industry experts say is far better because of its setting strength, yield and adherence capability – I was shocked at the fierce opposition by some Nigerians. Not even evidence from across the world that 32.5mpa cement was going out of fashion could convince the critics. Some even rejected the proof that India and China had decided to entirely phase out 32.5mpa from the construction industry – either for plastering or concrete work.

My shock was: how can anyone reject a proposal to improve construction standards in Nigeria, with all these gory tales around us? Does it make any form of sense at all? I was glad that the blackmail and intimidation did not work. The House of Representatives has taken a position on the need to standardise cement in the country and the Standards Organisation of Nigeria (SON) has also signed on to it. Industry players are now finally shifting ground and accepting that they will now do the right thing. BUA, Ibeto Cement and Dangote Cement have all committed to upgrading cement quality. We don’t stand to lose anything

This is the typical watery stew argument that Mr Kolawole is fond of serving his readers in ThisDay. Yes, Simon, it makes sense. It’s interesting that people who opposed this move have now become ‘blackmailers’ in the book of Mr Kolawole. For having a different opinion? Wonders. Once you start hearing people say ‘there’s nothing to lose’, it’s a good sign that you are the one going to pay for the experiment, not them.

What is the ‘proof’ from China that he’s speaking about? It is true that in January of this year, the China Building Material Academy announced plans to phase out the 32.5 grade of cement this July. Why are they doing this? The answer to this question is very important because it helps to illustrate how Nigerians copy policies from one country and by the time it arrives in Nigeria, it is something completely different yielding the opposite result.

The first clue in answering that question is this recent tweet and chart from Bill Gates:

Screen Shot 2014-07-20 at 14.44.52

As statistics go, that’s one of the most staggering we’ve seen in recent times – in just 3 years, China used more cement than the US did in 100 years. How did this happen? A basic understanding of the Chinese economy lets us know that the Chinese have ‘over-invested’ in a lot of areas. The kind of investment that has gone on in China in recent years is unprecedented in human history. To achieve this kind of staggering cement output, they have been expanding output for years. No expensive degree in economics or business is required to understand that when a company invests $1 back into the business, that is $1 that cannot be consumed by shareholders. In other words, for the owners of the business, the more a company invests, the longer it takes for them to realise a return on their investment. The game gets longer and longer.

As at 2012, there were approximately 3,000 – yes, THREE THOUSAND – cement manufacturers in China of different sizes. This explains why the market is hyper competitive with rock bottom prices and massive output as illustrated above. No genius is required to know that the Chinese government is the biggest shareholder in the biggest Chinese manufacturers there. As an example, the table below shows the shareholders in the biggest manufacturer of cement in China, Anhui Conch [taken from their 2013 annual report here]:

Screen Shot 2014-07-20 at 15.04.21

The biggest shareholder is the state-owned Conch Holdings. No point going through all the other big players – the pattern will be the same. The SOE model of China invests in different companies and allows them to compete fiercely against each other.

So with all this information, here’s the actual reason why China is phasing out 32.5 grade cement:

Screen Shot 2014-07-20 at 15.08.34

 

This is the answer you will find almost everywhere – in an industry with 3,000 players producing a ginormous amount of cement, the government wants to reduce competition so it can start to make returns on its huge investments in the sector. Most of the smaller players in the industry produce 32.5 grade which is of course easier to manufacture. By getting rid of the smaller guys, the big guys who have spent enormous amounts to increase their capacity can gain a larger share of the market and deliver better returns. If Mr Kolawole has any other sources that show that 32.5 grade is being phased out in China over safety concerns, he should kindly share it and educate the rest of us.

This is how we Nigerians see a medicine that was used to treat depression successfully in one country and then bring it to Nigeria to treat malaria. For Mr Kolawole, it is enough that China is phasing out 32.5 grade cement. There is no need to interrogate further, Nigeria must do the same thing. ARE YOU A BLACKMAILER AND DENIER OF PROOF?! Or do you not want Nigeria to be like China?

And yet, not only are our industries completely different, the problems being solved are two completely different things. In Nigeria we barely have 2 serious players in the cement industry and one controls over 60% of the market. We are nowhere near the kind of market that should be reducing choice and competition for any reason at all. Until prices start to come down and cement manufacturers are no longer making 50% profit margins, we should look to increase competition. We have so many houses to build and complete.

Yet it does not matter to Mr Kolawole that he probably lives in a house built with 32.5 grade cement or works in an office built with the same 32.5 grade or the reality that 99.9% of buildings in Nigeria do not collapse. Something must be banned. And of course since Aliko Dangote has said it, how can it be wrong?

No doubt about it, even one collapsed building is almost always avoidable. But this should lead us to ask serious questions as to why many many buildings built with the same cement do not collapse and some do. How can it be the cement? The proof that Mr Kolawole is ignoring is how this whole move has been an elaborate puppet master scam. I have documented in a previous blog post how this all began with one ‘Tunde Ojo’ and a faceless coalition of civil society groups in the civil construction industry in February of this year. This ‘Tunde Ojo’ has since disappeared, along with his coalition, from the face of the earth. Nigerians are being strung along and of course people like Mr Kolawole do not want buildings to collapse near them.

This banning of 32.5 grade cement is the surest way to take a problem that affects a small number of people – each one a terrible tragedy – and spread it across the whole population. In the name of keeping Nigerians safe, their pockets will now be picked even more forcefully by the same people who are already selling them cement at 3 times average global prices. The deed is of course now done and there’s almost no turning back. But it’s useful to understand that even as powerful as government and its crony capitalists friends are, it still needs journalists like Mr Kolawole to shill for them with emotional arguments containing approximately 0% logic.

This is the real tragedy. When the government, business and regulator are all in bed together, the only hope is the press. No one is asking Mr Kolawole to accept or reject the argument against 32.5 grade. But for Pete’s sake, dig a little deeper into the arguments and let your readers come away from you more educated. What we are getting is an eagerness to ‘conclude the matter’ in favour of Aliko Dangote and co.

I wonder why….

 

FF

 

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13 thoughts on “Simon Kolawole’s Watery Cement Argument

  1. LOL. Feyi has arrived. His subs are now delivered in national newspapers.

    I wish Mr Simon Kolawole had advocate for cheaper cement with as much passion as he has for the phasing out of the 32.5 grade.

  2. Feyi has over time picked up germane issues and thrashed them out based on all available facts and sound logic without sentiments.

    I hope you would one day be Nigeria’s Financial Minister/ Coordinating Minister of Economy.

    1. …and then proceed to the Ministry of Commerce and Industry, where he’d develop Mao level reforms!
      We might get a tissue industry revolution plan in place!

      1. I hope he doesn’t because then he would be crippled and may soon lose his sense of reasoning. Do I need to give examples of people who went in to work with the politicians in government in Nigeria and consequently lost their ability to reason well? Or who by virtue of being part of the party did not want to be seen as criticizing the part? One doesn’t have to be in government to serve ones country. Feyi’s current contribution to Nigeria is the education he gives to Nigerians via his blogs and of course giving Nigeria a good name in the minds of the many nationalities that read them.

      2. I appreciate ur love for feyi’s “white matter”. but mao level reforms? that’s like 1step forward,452643 steps backward. I think the name u are looking for is Deng xiao ping

  3. Oga Feyi has a very unigue style about been sanguine about the Nigerian economy.You have made me a proactive economist who has fallen in love with the Nigerian economy-can’t wait for you to fill in the yawning lapses as honourable minister and take us places someday. Mr Simon kolawe is just be sanctimonious with his fellow bed mates in government, that’s what most do they leave us without any form of understanding and education.Thanks to people like you.

  4. “The only hope is in the press”… You mean the same “press” that are owned by same politicians and business men?
    DoubleEf, again u have educated me…

  5. There are three People in Nigeria I respect their Style of Writing…on the basis of Logic…stringing facts together towards a reasonable conclusion.
    1. Gimba Kakanda
    2. Japheth Omojuwa
    3. FEYI…

    I stumbled on this Blog and since then, I have been Ardent Visitor

    Bottom Line: What Feyi does in all is Write-up is rather detective. In the words of Charlie Munger “…He exposes the Psychology of Human Misjudgment…”

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