BY GIRMACHEW GASHAW
With the coming of the African Continental Free Trade Area (AfCFTA), a lot of opportunities are likely to be created for enterprises. But the opportunities are not going to come alone. They are going to be accompanied by many challenges, ups and downs.
Companies or enterprises with experiences would play a pivotal role in facilitating the smooth functioning and progress of development under the framework of AfCFTA. BASF, a German company engaged in diverse fields of manufacturing advises the business community to give due focus to the issue of quality, among all other factors.
Herald Guest for today is BASF, one of the biggest chemical companies producing a lot of chemicals in the world. Based in Germany, the company was established 150 years ago. Today, it has factories and businesses all over the world. Globally, it has 85 business units. Textiles, toothpaste, soap, hair, food, and beer products used BASF chemicals as ingredients.
In short, it assists companies of various kinds by supplying chemicals and expertise to produce quality products.
The Ethiopian Herald spent less than an hour with the company’s Business Lead and General Manager Gift Mbaya to know more about the company and how the company operated and the value it brings to Ethiopia’s development. Excerpts;
The company has opened a new office in Djibouti and come up with a new system. Would you tell us about it in brief?
Recently, the company opened a free zone in Djibouti which is located 23 kilometers outside the capital on the road that takes to Ethiopia. We have our warehousing. So, the purpose of establishing this facility is to minimize the time it used to take from the production until the end user part. Previously, Ethiopian clients would purchase their products directly from Germany. A need to shorten the lead time from 120 days to 45 days, therefore, became necessary to enhance access to BASF products and services in the growing Ethiopian market.
Easier access to Letter of Credit (LC), Shorter lead times, the possibility of partial shipments, an office set up in Djibouti to support the logistics process, and foreign currency burden is eased with this process to ensure efficient services to our customers in Ethiopia.
How do you protect the quality of products that are imported to African companies?
Our quality is the same. The quality in Germany is identical to the quality you get in Ethiopia. BASF is an innovative company that spends a lot of money on research and development (R&D) before a product comes in. For instance, from the synthesis of the first molecule until we see it in a bottle, a given agricultural product may take ten years. When the product comes here, the government of Ethiopia asks us to spend three more years of trials on Ethiopia farms before the chemical product goes to the market. The reason the product passes through those processes is to ensure its quality. So, the quality you find here is the same as anywhere else as long as the product is coming from BASF. That is what keeps us going forward.
Research and Development (R&D) is one of the mechanisms applied to protect customers from being deceived by others. We are here for the last 150 Years to defend our product.
Our customers have been with us for the longest time and they know what to expect from BAS, they stand by the quality despite the turbulent times as they also know Consumers also expect good products. They do not use the shortcuts that are available in the market.
There is a shortage of foreign currency to import such chemicals. So how do you deal with the challenge?
It is a big challenge. However, the government continues to address that. The company exporting products as a foreign currency will not be a problem. We, customers, do have the challenges of acquiring foreign currency. That is why this Djibouti project becomes important for us. We are bringing products from Europe into Djibouti on our own and customers can get smaller parcels and can buy less than they require for today.
Instead of spending six months to have a chemical product, they buy it within one month and then wait for another allocation of foreign currency as the product becomes available.
But now they do not have to put out a lot of money in terms of clear cash flow buying a lot of products which they will use for six months or a year.
Now they can buy what they want from Djibouti which is two days away from them in terms of transportation. So that is another idea which we considered as saving the Djibouti office to help us.
The Djibouti office is assisting more simplified service to our customers when it comes to documentation and Inco terms. For example, we are using X-Djibouti, X warehouse for on track which means once the customer documentation has been finalized, they can bring their trucks in and we load the goods on top of the trucks.
This will minimize the hustle, cost and time. Within two days, customers will be more than happy to do business with us.
If I want to import products today, I have to deposit money to my bank 100 % of the equivalent in dollars. That is a cash flow which I put into the bank and wait a long time until my goods arrive for it to be dispersed. Now, we are saying instead of putting so much there today, you can put in little by little and it helps you with a cash flow which is an important saving for the customer.
They are not lodging the full amount of what they need for one year or six months with the bank. They are only going to do I am going to require or I am getting an allocation, a small allocation of foreign currency so I deposit a small amount of birr to my bank, it helps them manage their cash flow in a business because the product is nearby they don’t need to invest in a lot of products today which they will use in six months.
Ethiopia has a plan to be an industry hub. What will be the contribution of your company in realizing the country’s goal?
Our contribution is the innovation we bring. We are operating in many countries in the world, companies, and industrialized countries and that kind of science can only benefit BASF in Ethiopia as well as the industry here.
And not only that, we are talking earlier with our colleagues about the interest of science even in children. We have a kid’s lab. Kid’s Lab is a program in which we bring children from various schools into a lab for two to three hours to excite them about chemistry as they are the future. So, we need to train our children in science. Children who are in primary school must not be scared of mathematics, biology and chemistry. Africa requires scientists and thus we have to invest in that. BASF has a program called Kid’s Lab which we have introduced in Ethiopia. Time and again, we bring children and tell them about science and chemistry as they are the posterities. In this regard, we are partnering with the government.
Why has BASF opened its office in Addis Ababa?
We have been here for a long time since the 60s and when BASF closed some of its offices in all of Africa we were quick to open it here because it is the place to be. With the rising population, we see that Ethiopia is the second most populous country in Africa next to Nigeria and notice the government’s plan for industrialization.
By 2050, the world will have 20 billion people and 70 % of them will be living in cities. We need to increase our agriculture by 50 %. We need to increase our electricity by 35 % and all those things touch Ethiopia. As the population is increasing, the needs for electricity, food, and the need for living in the cities are equally increasing and the industrialization and chemistry of BASF fit very well. We have a part to play as BASF in partnering with the governments to bring industrialization because we require it. We are here to see the market for our products.
As you said earlier the company was staying for a long, if BASF is discharging its social responsibilities here in Ethiopia, please mention some of them.
Our kid’s lab is one of them. The training we give to our children is also another. Our sister company, RAT where we are doing in the Amhara region, where we are putting the production plant for vegetable seeds for exports with over a 10 million euro investment in the region.
We are affecting the community, employing a lot of staff over the peak season and have over 100 people working in that facility which is affecting the community around us.
Please tell me the challenges that BASF is facing.
Remember, we do not sell directly to the market. Our partners or the manufacturing companies are buying from BASF and we are linking those companies with it.
The challenges they face are being addressed. One of the groups of companies we belong to on the agriculture side, we are part of the group life as a business we are part of the European Union Business Forum of Ethiopia where any challenges we have, we engage governments that way as a group and have seen a lot of positive changes with customs, the finance ministries and the government is aware of the challenges and willing to listen to. We have seen improvements over the years working with them through making intensive dialogue with the government. We have a very good relationship with them to address some of the challenges such as foreign currency and other issues. We know the government is tackling those issues as we go along.
The challenge we have locally here is what has resulted in us appearing in Djibouti. All those challenges with the local forex, the logistics as I said are important with the production with the pre-shipment delays, container shortage and the freight.
All those challenges have constituted our office in Ethiopia as a whole. To be part of the solution, we need compatibility to be close to our customers to have easy access to us. So we are seeing the challenges, we have been part of the solution opening the office in Djibouti.
When we came up with this idea, officials from the Investment Commission, revenue and customs authority, and the Ministry of Trade showed a very welcome idea as they understood how it was going to make processes easy for local manufacturers. We take time to talk to not only our customers but beyond about how this can make their business easy in a time when the economic situation is not very good.
What does BASF expect from Ethiopia to flourish its business?
We desire to grow the market. For the market to embrace the science and chemistry we bring as they could do much more. We can do much more than we are doing right now if manufacturers embrace the science and want to learn what we want to know. Sometimes some of the manufacturers we talked; they just want to know how much the price is. Considering the competition is going to come, they should ask “How can I improve my product? How Can I Improve My quality?” Africa is going to be one market soon and when competition comes, you need to be associated with the quality and we can offer that. So if more customers embrace our chemistry, more customers learn from us and improve the products.
How does BASF encourage its customers to export from Ethiopia as an African free trade area on the way to opening up the market?
AfCTA is an opportunity for our customers to export their products. If companies want to be competitive, they have to embrace quality as they compete with all of Africa as the market is wide-open and that is what we keep encouraging them to embrace quality and the value that comes from having quality products. And then you are trusted by the consumer and supporting business group.
Why does BASF not open its manufacturing line here in Ethiopia?
It could cost a lot of money-Billions of dollars to have. If we take across Africa, we would have smaller production sites in South Africa and Morocco due to the huge cost, it does not make sense.
They need to become very expensive for the market here. But, if the capacity grows for us much bigger then that will be considered like we have done before previously in there but we have sold that business.
We had a factory in Kenya. It was a production site for construction chemicals as we have seen the business. If an opportunity arises and it warrants us to open a factory BASF look into that. We have a lot of products like I told you, we have a production site generator when you go to an easier place like in Europe because it’s a production site for vegetable seed production.
It can be done but it requires a lot of resources for us to do that. What we are doing is bringing our technical expertise, going to customers carrying out the production and supporting them looking at their facilities to get more innovative whatever they have. We bring the technical expertise here as you look for opportunities and also eventually manufacture the number and the volumes per meeting. However, now, we work to develop the local manufacturers.
How much the company makes itself ready to use business opportunities about Africa’s free trade area is bringing to Africans?
This is coming and that is why we are emphasizing that for manufacturers here in Ethiopia. To make it they need to embrace quality, technical expertise which BASF can give for like 10 years in developing our products.
We have the know-how, the zeal and the capacity to do the product which we are making. Can we improve these products, can we improve the whole materials, improve the quality so that it can be accepted in the market because of the competition is coming.
What are you trying to do on a day-to-day basis? Along the way, we also train our staff so that BASF, we want to have an educated workforce in the field talking to our customers. So that together we can come up with a plan and say anything we can do to improve the quality of our products in the market for ourselves as well as for our customers.
Thank you.
It is my pleasure.
The Ethiopian Herald 20 August 2022
