By Chinelo Obogo, [email protected] 07064781119
The high cost of custom duties paid for the importation of equipment has been a source of worry for ground handling companies. That explaines why the Managing Director and Chief Executive Officer of Skyway Aviation Handling Company (SAHCO), Mr Basil Agboarumi, is urging the Federal Government to realise that as essential part of aviation business, ground handling companies also need intervention funding having been hamstrung by the huge charges they are paying to import equipment and the difficulties they face in sourcing forex.
The Federal Government granted import waivers to airlines but such grants were not extended to ground handling companies and Agboarumi argues that the sector should be granted the same favour as the cost incurred from duty payment alone is astronomical.
The most pathetic thing about our business is that we do not get custom duty waivers for equipment importation like what the Federal Government did for the airlines. It is so pathetic that when people talk about aviation, they only talk about airlines without knowing that there are very critical aspects of aviation, which is why when you talk about flight delays and you don’t have the right equipment on ground, it affects operations. We believe that whatever the airlines are benefiting from the Federal Government should be extended to ground handling companies because we source our equipment and machines from the same market. The aircraft is very costly just like our equipment are also very costly. Without insurance the airlines cannot operate and without insurance, ground handling companies cannot operate as we both submit our records to the NCAA to ensure that we are fully insured.
Sometime last year, we spent more than N38 million to clear one equipment and this year, I have spent almost N69 million to also clear one equipment and this doesn’t include the cost of purchase and shipping. It is so expensive because when customs comes up with their ratings, you would have to pay unless you want to ground your business and that is why we are appealing to the government to grant us import waivers just like they granted the airlines.
We used to be owned by the Federal Government and we know how things were until Sifax Group came in and bought this place 100 percent, which is when things began to look up. Our investor, Taiwo Afolabi bought this place and was pumping money into it to ensure that we succeed, not minding what the returns are at the moment. Not every business owner would do that and that is what helped us to get to where we are. Immediately he came in, there was massive deployment of critical equipment, the warehouse was built and we are still investing, that is why we are pleading with the government to come to our rescue and grant us import waivers. We have got to the point where we can’t continue like this and we need to see things differently and ask for government’s assistance.
We are in aviation and apart from the issue of safety which is the most important, we also have the advantage of being the fastest mode of transportation across the world. You would observe that the cost of freight by sea is different from the cost of freight by air. We are into cargo business and for an importer or exporter to choose to move his goods by air is because you want goods to get to its destination faster. Anyone that has been put on this gateway of air transportation by the government has the duty to facilitate movement, whether you are a ground handler or not.
Even if there are charges that any importer or exporter needs to pay, the best thing to do is for it to be done in such a way that it would not slow down movement. I always believe that it is good for us to learn from climes that are already working and if you travel to the US or the UK, you would only see one person that has been trained to represent all the other agencies. So, if there are any charges that needs to be paid, you pay it to that person and they disburse it. But when there are so many agencies in the gateway, performing the same function, it does not help anybody. It only slows down the business.
High cost of running a ground handling company
To be a ground handling company like we are, there are expectations. First, you have to be accredited by the Nigeria Civil Aviation Authority and for you to operate effectively, you must have the right kind of equipment and the type of equipment we use are very expensive and we import them. For any aircraft that comes in, there are various types of equipment that we use to handle it in terms of cargo, ranging from high loaders, ground power unit, passenger stairs, belt loaders and so many. We get some of these equipment from the UK, Europe, and US, so you need forex in different currencies to import them.
Also there are some certifications that you need to function as a ground handling company besides that of the NCAA. Every ground handling company in the world must be ISAGO (IATA Safety Audit for Ground Operations) compliant and it is not cheap. Even during the shutdown, we were still being audited remotely with the hope that when restrictions are lifted, there would be a physical check. Even at that, we still pay a lot of money in dollars because auditors are brought from other parts of the world to come and audit us.
We also just completed a new training facility and we got approval from the NCAA for it where we run training for our staff very frequently. We operate from 21 airports at the moment across the country and it is either we are moving trainers to those places or we are moving our staff across to be trained because they must have the basic training that everyone that works in a ground handling company must have for the sake of safety. When there is no safety on ground, you cannot guarantee safety in the skies. It is not all the training that we do in Nigeria, we do the basic ones we can do here and we also send our staff for training abroad because when you are buying the latest equipment, you have to train your staff to be able to operate them. For instance, we have introduced electric tractors to the ramp and we had to ensure that our staff get the training to handle them.
The same way airlines train their pilots regularly, that is how we also train our staff, that is why we advocated for a safety threshold charge to be able to meet up which the NCAA has now approved. The equipment we buy also suffers wear and tear and that is why the same way airlines buy spare parts when they buy new planes, is the same way we also buy spare parts when we buy our equipment.
When we were advocating for a safety threshold for charges, we wanted a situation where we can earn enough to meet all these needs before we even start talking about profit. For a company like ours that is listed on the Nigerian Stock Exchange, at the end of the year, shareholders would want to get profit for their investment. All these things have to be put into consideration when you are costing ground handling services. We also prioritise our staff welfare by ensuring that they are well paid and get full medical attention when the need arises.
Also, we don’t operate in isolation, we belong to the Airport Services Association that brings together all the ground handling companies in the world and we are privy to what airlines pay for ground handling services in other parts of the world.
Nigeria has more potential for local cargo, export expansion
I have been in this industry for some time and I know the trends. More awareness for local cargo transportation is being created and if you go to the local airports, you will notice that cargo facilities are being built. Also clients are beginning to go into agreements with cargo agents to transport cargo within Nigeria, it is an aspect of the business that is beginning to grow. Don’t forget that road transport companies have already built up capacity in that aspect and airlines can do the same by tapping into this growing sub sector and dedicating smaller aircraft just for the movement of cargo within the country.
We are having issues with how people move cattle from one part of the country to the other but since we have airports that are spread across Nigeria, you can kill the cow in the north and that same day, it can be packaged, delivered to Lagos and sold. These are business ideas and airlines can key into it.
In the aspects of exports, the problems we have has to do with the fact that as a country, for many years, we were only interested in consumption and not production because of the oil we have. Even when we have agricultural products, you would discover that sometimes, it gets spoilt because there was no interest in exporting it. But people are now understanding that the new oil is agro exports and if you want to earn foreign exchange, you must export and because of that, export is growing. At the time we were building our warehouse, the demand was for import but now, more people are exporting, that’s why we telling the Federal Airport Authority of Nigeria (FAAN), to give us more land because we need to expand. We have seen that the demand for export is increasing and at the moment, our ready market is basically the West African region but we still need to do more on packaging and to ensure we meet the recommendations of the countries we want to export to.
For us a ground handling companies, we are ready and building up capacity to ensure that as export increases, we would be there to offer our services. But at the end of the day, the most important thing is to have the space that we would need for expansion.
We support airport concession because for us as ground handling companies, when you have the right facilities on ground, it makes the job much easier. But with the way the airports are configured, it makes our job difficult. In the area were we operate and where we have full jurisdiction, we do our best to get things done. Like in our export warehouse, it is the duty of the government to put facilities like the cargo scanning machines in place but you would be surprised that we had to get those facilities ourselves waiting for the government to refund the money and it didn’t come cheap because if we don’t get those things done, we would be out of business. At a point, we had to fix the road that linked the cargo warehouse to our facility and it cost of millions as it got to a point where we couldn’t operate any equipment and we were losing business.
When we were still government, we had issues with our warehouse in 2002 and nothing was done and it took a private investor to come in and build us a warehouse and today, we can say boldly that we have the best warehouse in West Africa, fully automated. We pay a lot of taxes to the government, so it is expected that we would need a convenient environment to operate and we believe that concession would bring about the right facilities for the business and it would make things easier for everyone.