Steel and Tube Industries: A Leading Manufacturer of Steel Products in Uganda

Interview with Nilax Bhatt, Executive Director at Steel & Tube Industries Ltd (STIL)

What is your assessment of the sector in Uganda? What are the latest trends and challenges?

We are in the manufacturing of steel. The sector can be divided into three main sections: the first is downstream, then midstream, and finally upstream. The downstream investment is sufficient or more than sufficient to what the country can absorb currently. Our estimation is almost $600 million worth of investment. This is one of the leading sectors of the Ugandan economy. Downstream is making the final products and distributing them to the people directly. Midstream is between downstream and upstream. Upstream is the iron ore mining and actually getting something from the ground. Midstream and upstream have very limited investment. If that vacuum is filled, it can change the economy of the country. As of now, the downstream market is quite crowded and very dependent on importation. All midstream and upstream products are sent outside of the East African region.

Are there companies that could come in to fill this gap?

At Isimba Hydropower Dam, we supplied 80 to 90% of their steel requirement. We were also shortlisted as one of the top two companies for the SGR which is taking off now. We have done many other infrastructure projects where we were able to supply material.

There are companies who can come to fill that gap provided some infrastructure challenges are met. In Uganda, the iron ore content being mined is one of the best. It ranges from 60 to 80% which is quite good quality iron. The problem is that we do not have a reducing agent, coal, or we need a gas, which is more advanced technology. Bringing coal up here has its own implications in terms of cost. Bringing gas requires pipelines which is a government infrastructure issue. The way the government has focused on the oil sector by building refineries and crude oil pipelines is the same focus which we hope will now be taken for the NDP3 which is the next five-year project for the government. They have factored iron and steel into that plan and that is where we are more hopeful of getting that vacuum filled. Many downstream companies who are big manufacturers and players also intend to participate in the midstream and upstream. It is creating the development that is needed. That vacuum provides a lot of opportunity for the players who are in the downstream and at the same time for the economy of Uganda by adding much more value within the economy than depending on outside and sending the forex out of the country.

How do you compete in such a crowded segment of the market? What is your competitive advantage?

To keep ourselves running and as one of the leading companies, we focus on the quality of our products. We invested very heavily in quality. We try to match the world standards. Because of that, we were able to supply major dams and infrastructure projects like highways, expressways, and bridges. Second is the availability of our products. We continue to make ourselves more and more consistent in getting raw materials, processing, and supplying. We are able to provide products on demand. The third major factor is our range of products. We are one of the few companies that offer the full range of products in the construction segments. We have tubes and hollow sections, wire products such as nails and VRC, and hot rolled products such as iron bars and rebars. We also roll sections. That range has given us an added advantage to keep us ahead of the competition. Our next focus is to capture the regional market. We have made very good progress on this in the last two years and we are very hopeful of achieving this.

Where are you present?

From Rwanda, we are serving DRC. We supply materials to South Sudan. We have been in Burundi for more than five years. We supply our products to Kenya. We import materials from Mombasa, process it in Uganda, then ship it back to Nairobi or Mombasa because of the strength of the product and the quality. That uniqueness gives us an advantage. Improvement in the transportation on Lake Victoria will make us more competitive to capture the Tanzanian market.

Do you need to have a presence in the country you work in?

We do not necessarily need to. But for the economy of some products, it might require us to have a presence in Kenya or Tanzania in the coming future.

What are some of your success stories?

At Isimba Hydropower Dam, we supplied 80 to 90% of their steel requirement. We were also shortlisted as one of the top two companies for the SGR which is taking off now. We have done many other infrastructure projects where we were able to supply material. Another success story is a $50 million project we are concluding now. We sourced state of the art, highly automated machine lines from Asia and Europe. Because of that, we have been able to comply with most of the requirements of the infrastructure projects and we will be able to do the same in the future because those projects are ongoing. After contributing to these projects within the country, we are now aiming to supply similar projects outside of the country in Kenya and Tanzania. They are also going on the same line. We are very confident that we will be able to meet our history of supply and success.

How do you address the CSR aspect?

We do CSR on a case by case basis. We help regional organizations and NGOs. We have created in-house training facilities to train youth. We have a memorandum of understanding signed with a University and the Vocational Training Institute in Nakawa. We also work with UMA, the Uganda Manufacturers’ Association. In the last three years, we have trained almost 355 interns, fresh graduates, all diploma holders from the university. The program is three, six, and nine months. They are then absorbed by us or taken up by other industries within the sector and also outside of the sector. This skill set availability is quite scarce within the country. Once someone has that technical and hands on skill, the demand for that kind of workforce is quite high. We have been doing very well on that side. We partner with SDF, Skills Development Fund, through the government and with the Private Sector Foundation which was a project funded by the World Bank. We trained more than 100 interns on that project. We employ around 1,000 workers. Out of 1,000, we identified and trained around 150 on soft skills. For a person who is running our line that is very good technically, to grow himself to the next level, he will then need supervising skills to be able to lead a team of 15 people. Those soft skills such as managerial aspects, supervisory skills, calculation of cost, and reporting skills we impart with the help of the faculty from the Uganda Polytechnic Kyambogo.

Are you looking for technological partnerships or financial partnerships?

The project that we concluded last year was launched by the President of Uganda in November. We invested $80 million on our own with financing from institutions within the country like the commercial banks and development funding from the Uganda Development Bank. We have achieved all we can at this stage. The second phase will be to find a strategic partner. We want someone who can be here for the long term and add value and knowledge on the technical side as well as financing. By 2022, we want to begin phase two of this project. It will be bigger than what we have achieved so far.

Project yourself to the long term. What is your vision for the company?

We want to cover East Africa and Central Africa, and then beyond. Year to year, we have had a 25% growth rate over the last ten years. We want to replicate this in other parts of Africa. In terms of processing, we are in the downstream now, but the next step is to go to upstream. We are very keen to get into the mining side and sponge iron.

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