WHICH WAY IRON AND STEEL SECTOR?
1. The Iron and Steel Senior Staff Association of Nigeria
(ISSSAN) and Steel and Engineering Workers Union (SEWUN) wish to thank you over the interest you have shown in the survival
and future of the Iron and Steel Sector. For the avoidance of doubt these companies
are.
Ajaokuta Steel Company Ltd. Ajaokuta, Kogi State
Delta Steel Company Ltd. Ovwian Aladja, Delta State
Katsina Steel Company Ltd., Katsina Staate
Jos Steel Rolling Company Ltd. Jos, Plateau State
Oshogbo Steel Rolling Company Ltd, Osun State
National Iron Ore Mining Company Ltd. Itakpe, Kogi State
National Steel Raw Materials Exploration Agency Kaduna,
Kaduna State
Metallurgical Development Centre Jos, Plateau State
Metallurgical Training Institute Onisha, Anambra State
Nigeria Machine Tools Company Ltd Oshogbo, Osun State.
These companies, which were established in the 1980s,
have been epileptic in operations since inception. The reason for this is not
far fetched. But we are at a loss as to why there has been policy summersault
from Government.
1. Policy Summersault
It has become urgently expedient for Government to articulate
and publish clear-cut policy guidelines, directives and programmes of change in the public steel sector. These would help in clearing the fog of inconsistencies and nebulousness, which had lately characterized
recent major policy initiatives and transition programmes in the steel sector.
At the beginning, most of the steel companies were included
in the schedule of privatization as put together by BPT. The process had recorded
varying degrees of progress in the various steel companies slated for privatization, up to the point of the conclusion of
technical and financial biddings, awaiting the selection and appointment of preferred bidders by NCP and Government.
Surprisingly, a new song now emanates from Government,
which now prescribes liquidation instead of the erstwhile programmes of privatization in some of the companies.
The questions then arise
· How due are these
processes?
· What laws of the
land do they conform to?
· Is Government
formally jettisoning the privatization processes, which had
painstakingly
and gradually built-up over the years.
There is urgent need for Government to come out with
definitive positions on these matters
2. Liquidation
Government is as yet to articulate its conceptual framework
of the reported new policy on liquidation of the steel companies. Until a clear-cut
policy statement is released in this regard, we shall be content with applying as our reference point, the ordinary concept
of liquidation, which is primarily aimed at the repayment in full or part of the accumulated company debt from proceeds from
the sales of company assets.
A critical focus on the foregoing makes the following
issues germane
2.1 The fundamental and overriding
objective of liquidation is preponderantly concerned with the satisfaction of creditors. This apparently negative concept
could hardly address the organization as a going concern that necessarily requires growing and fulfilling its obligations
to the workers, the economy and the nation at large
2.2 Liquidation is a precipitate idea
borne out of frustration on the part of Government, which wrongly perceives the quantum of money realizable from the sales
of the assets of the organization as the principal criterion for assessing the effectiveness of its current steel sector programmes
Unfortunately, Government had ab initio predicated its
privatization and other ownership change progremmes on the desire to realize money to substantially offset the terminal obligations
to staff slated for disengagement as a consequence of the programme
These programmes as conceived by Government had been
anomalous to the extent that they devote undue emphasis on the outright sales of the steel companies and revenue accruing
there from. The solution does not simply lie on the sale but in making the plants
viably operational. The competence and technical capabilities of the prospective
buyers should command pre-eminent weight, with the ultimate selling prices regarded as of relatively diminished relevance.
· How far does this new liquidation policy align with
the primary objective for the
installation of iron and steel making capacities
across the country?
· Have we met the fundamental objective of steel
production as the bedrock and
springboard for industrial and technological growth?
· What positive and multiplier impact to our economy would be achieved
by a steel
development programmed rooted on liquidation?
2.3 Our information is that the liquidation hammer now hangs on the neck of any rolling mill
or possibly and steel company whose sale/privatization is unlikely to generate revenue sufficient to pay off its liabilities
This raises a fundamental question. How does Government define debts/liabilities? Obviously
the so-called debts of the steel companies as wrongly defined by some consultants incorporate non-trade loans like capital
grants, utility and other infrastructural costs extended to these companies right from inception. The following are noteworthy.
Government had ab inition expressly located its principal
objective for steel development on factors other than profitability and cost recovery consequently, Government had until recently,
ensured by fiat, that the steel companies marketed their end products at prices designated as “affordable” to
the citizenry. Prices were therefore generally fixed at below breakeven points. Revenue gaps invariably engendered by such deliberate Government socio-politically-motivated
policies should not be factored into the debt stock of the steel companies.
Relatedly, it has been an open secret that the operation
of the steel companies had, by and large, preceded on the basis of the “hand of Esau and the voice of Jacob”. This is to say that most major policy decisions and even day-to-day company operations
had been peremptorily dictated and teleguided from “above”. We wish
to state unequivocally that poor corporate governance and liabilities, which arose directly, indirectly or obliquely from
such external teleguidance, should not be adversely, factored into the corporate scorecards of the steel companies.
Much of the so-called liabilities arose from commitments
on indispensable factors of steel production like electricity, gas, etc. This
cripping under-funding of the steel companies by Government over the years engendered protracted plant shutdowns and revenue
losses, arising largely from the inability of the companies to consistently and viably operate in a manner and rhythm capable
of meeting their objectives to creditor and patrons.
Cost of this nature should normally be addressed from
either of the following dual perspectives
a) Written off
as items of subsidy. Subsidy and protectionism are primordial and global underpins
of domestic steel industries. Even the most advanced western economics had applied
and are applying these tools as well as other forms of fiscal instruments to nurture and protect domestic steel companies
to adulthood and profitability. The underlying principle is that profitability
as the sole basis for the installation and growth of steel production capacities is unternable and cannot guarantee national
aspiration for industrial and technological advancement. It implies that it had
been a global norm for Governments to take necessary affirmative actions to protect their domestic steel industry.
b) Computing and converting
these loans and grants to Government equity. This approach, which increases the
debt equity ratio in favour of the latter, had earlier been adopted by many of the steel companies with some of their Boards
of Directors already poised to pass and effect formal resolutions to that effect prior to the current ownership change regime.
2.4 It has become urgently imperative
for Government to clearheadedly reflect some of its most recent policy statements with regard to the privatization and transition
programmes min the steel sector. It is most confounding, utterly inexplicable
and fundamentally anti-theatrical to avowed Government objectives that some of the companies now being penciled down for liquidation
have has a line-up of prospective buyers who have successfully bided for and are financially and technically ready to take
over and grow the companies.
In particular, competent and willing state Government
should not be barred or impeded, under any guise, from buying over steel companies within their boundaries. In a relative context. State Governments would naturally be
propelled by patriotic instinct to safeguard and grow the organization in the present and future interest of the workers and
the state. There can be no gainsaying that this presents a more viable and people-oriented
option than liquidation.
It is in the foregoing context that we fail to see the wisdom in the recent policy of Government designed to
retroactively preclude the takeover of Katsina Steel Rolling Company Limited by a Katsina State Government agency, which had
been declared the highest bidder. Government needs to urgently restore public
confidence on its intentions and recent policies by reversing this retrogressive and patently negative ouster prescription,
more so as KSRC is now slated for liquidation with its abysmal concornitants.
4. Budgetary Allocation
Recent history should have sufficiently fore-warned
Government on the pitfalls inherent in the non-provision for the steel companies slated for privatization in the budgets for
successive years on the tenuous and flawed logic of adherence to some tentative schedules of privatization or other related
changes which, from experience never materialize
This wrongheaded approach rendered most of the companies
comatose in most of the 1990s and 2004 with monumental revenue losses and jumbo arrears of salaries. Curiously the same Government would invariably, in time, clear the huge arrears despite this monumental
misuse of human and material resources. This approach has, no doubt, proven extremely
self-defeatist.
Unfortunately, we are once again confronted with this
hackneyed scenario of total non-provision for personnel and overhead costs for the steel companies in fiscal 2005 on the assumptions
that the ongoing privatization and other ownership changes would have been concluded by the end of 2004.
2005
Salaries
The facts on the ground prove palpably otherwise. With
Delta Steel Company Limited, the Inland Rolling Mills and National Iron Ore Mining Company Limited, Itakpe, at stages far
from the envisaged conclusion of plant ownership changeovers. We appeal that
the most realistic, flexible and practical approach is for Government to provide fund up to the end of 2005 fiscal year. Subsequently, financial disbursements would stop the moment the takeover process is
consummated in any of the companies.
We emphasize that Government should note that so long
as staff remain formally engaged, all legal entitlements remain valid and could never be wished away.
5. Payment of Terminal Benefits to Staff Slated for
Disengagement
When Government made a seemingly unequivocal commitment
to the nation on its intention too settle the terminal benefits of steel sector workers slated for disengagement by the end
of 2004, it was received with considerable relief. This categorical pronouncement,
emanating from the respected Minister of Finance herself, among other high ranking officials of state, was perceived as an
indication that Government appreciated the overriding role of the payment of terminal benefits as the leading determinant
of the success or otherwise of Governments programmes of ownership change. The
general interpretation was that the aggregate severance benefits had been duly considered and adequate budgetary provision
made to that effect.
To our utter chagrin, we were sooner informed that should
the programmes proceed as planned, barely 30% of the terminal benefits would possibly be settled by the end of 2005.
We wish to reiterate that the payment of retirement
benefits in full constitute an irreducible minimum condition for the conclusion of the various programmes of ownership changes
in the public steel sector.
The earlier suggestion in some quarters for the downsizing
of the aggregate benefits to fit into some pre-determined framework amounted to crass insensitivity. Nor shall we accept fragmented or installment payment, which would make a mockery of the whole exercise,
negating the basic goal of the terminal provisions.
INCONCLUSION
ISSSAN and SEWUN wish to thank all those concerned about
policy issues as regards the iron and steel sector and urge that the following be done.
(a) That the Iron and Steel Sector be properly funded
(b) Should the Government want to sell, give away, privatize or liquidate, what is uppermost in our demand is that the terminal
benefits of all the workers be paid
This is the surest way to peace.
Yours faithfully,
Titus Orimijupa
Monday Aguele
PRESIDENT (ISSSAN) PRESIDENT (SEWUN)
Didi Adodo
Kassim
Kadiri
GENERAL SECRETARY
GENERAL SECRETARY
(ISSSAN) (SEWUN)
