Could you give us an overview of Nexans’ and capabilities in the region?
Nexans first started as Kabelmetal 50 years ago, with a base in both Nigeria and Ghana. Our mission has stayed to this day to electrify African countries. As a country with a long history in gold mining, Ghana serves as a regional distribution hub from where we export to neighboring countries like Burkina Faso, Guinea and Mali, following our customers in the mining sector. In Nigeria, we operate via two sister companies, Nexans holding a minority share. In Francophone West Africa, we have been present in Ivory Coast for four years with new plant in Abidjan. Mining represents 10% of our turnover. We mainly operate through a consignment stock model, keeping stock and delivering on-demand to key customers.
Could you comment on Nexans Kabelmetal’s business performance over the last year?
Q1 of 2020 was the most difficult due to the nationwide lockdown rolled out in March 2020. Afterward, however, we experienced intense demand that allowed us to exceed our targets for 2021. Indeed, container transportation from China, India and Turkey has been seriously impacted by the pandemic, but the disrupted international supply chains only increased demand for locally produced goods. I believe the trend to buy more locally will last in the coming years.
Nexans is the first local manufacturer to have received authorization to produce DC solar cables in Ghana. Can you tell us a few words about this milestone?
The international political push for solar energy has not yet materialized in Ghana, however, there are many “green” projects in the pipeline. More than 200 solar projects are currently under licence approval by the Energy Commission in Ghana, and each will be requiring DC and AC solar cables. Preparing to meet that future demand, we decided to develop the DC solar cables locally, even though sales for these products are relatively low at this moment.
Could you elaborate on the challenges of transitioning to cleaner energy sources in Ghana?
Ghana produces excess energy with around 40% of electricity sourced from hydropower from major dams in the Volta Region, while the remaining 60% is coming from privately owned gas and fuel plants. The country signed multiple Power Purchase Agreements (PPA) which prescribes buying from these private suppliers, regardless of the energy source. Despite Ghana’s desire to promote the shift to renewables, investing in more power sources would lead to more supply build-ups. We are nevertheless optimistic that solar power will be growing in the country because this is a cheap energy source and there is mounting pressure from both the international community and the private sector.
Can you identify Nexans’ growth drivers moving forward?
Ghana set an ambitious goal to be 100% electrified by 2024, which will be massively pushing our growth forward. The same increasing electrification trend is also relevant for countries like Nigeria and Ivory Coast. Another growth pillar for Nexans is the mining sector. With sustained high gold prices feeding into many projects (at least four mines are soon to open in the north of the country), the industry will enter a period of rapid growth which will be propelling our business. Finally, the solar sector creates demand for niche DC cable required to link the solar network to the grid. As early local producers of these cables we are well-positioned to serve the needs of this emerging market.
How efficient are local content laws at incentivizing local procurement?
There is a gap between the implementation and the willingness to promote local content. A foreign investor in Ghana is exempt from import taxes, while also being subject to local content requirements. Therefore, incentives to buy locally coexist with incentives to import cheaper goods. Another issue that mitigates against buying locally is the low stock of products and raw materials in Ghana. For instance, we import all of our raw materials except for aluminum. If local content laws are to be effective, we need more cohesive policies that grant both the availability and benefits of locally purchased products.
What is a key goal for 2021-2022?
One of our main focuses from here on is to leverage to a greater extent the region’s potential by taking advantage of the ECOWAS free zone. There is a lack of local cable manufacturers in many ECOWAS countries where we could send our products.